Voices: Safe, cheap
food doesn’t come by accident
By Bruce Dehm
Daily Messenger -
Thu Aug 07, 2008
Groveland, N.Y. - Everyone deals with risk, the chance of
being exposed to loss or injury. For most of us, managing risk is simply a
matter of buying life and health insurance so we can support our families in
the event of an accident or illness. For farmers, risk management consumes a
significant amount of time and resources and directs much of their activity.
Managing risk explains a lot about why farmers do what they do and how they do
it.
For farmers, risk comes from many different directions.
Weather and biology are two of the most uncontrollable factors in food
production. It can be too hot, too cold, too wet or too dry. These conditions
not only stress plants and livestock, they can promote the growth of other
organisms such as molds, insects, weeds and bacteria that can further sicken
animals and reduce yields.
Beyond the physical and biological environments, farm
businesses are subject to risks that come from low prices, high costs,
government regulation, an inadequate labor supply or lack of sufficient
capital. Since almost all farms are family-owned businesses, they also face the
risk associated with making sure the next generation is in place to continue
the family tradition in a world that is becoming more and more complex.
Our farmers have and use a lot of different tools to manage
these risks. Losses caused by extreme weather such as flooding, hail or drought
can be minimized by making sure the proper crop insurance is in place at the
beginning of the planting season. Although nobody is ever “made whole” from
insurance proceeds, insurance can reduce the risk of the business being
wiped-out in a single year. Farmers can collect on losses from acres that were
prevented from being planted by poor weather and from losses due to devastating
storms or drought. They also use life, health and disability insurance to
improve the chances of the farm business surviving death or injury.
Technology, like the type often described in this column, is
adopted and used by farmers to improve the chances for profit-making
yields. Wet fields are tiled to make
them easier to work in the spring. Irrigation equipment is installed to keep
crops growing in dry spells. New and more fuel efficient tillage equipment is
employed to get fields planted during narrow windows of opportunity. Better
genetics are planted or used in livestock to improve resistance to disease,
pests and drought. Futures markets and forward purchasing contracts help
farmers buffer themselves from extreme price volatility in the commodities they
both buy and sell.
Our farmers and livestock producers concentrate on
controlling what they have the ability to control in hopes that their business
will not be overwhelmed by events they cannot control. Producing the safest and
cheapest food in the history of humankind does not happen by accident.
Current Conditions
The price paid to organic dairy producers for their milk has
not increased during the past year while operating expenses have soared due to
higher feed and fuel costs. It is uncertain whether processors will increase
prices, leading many producers to re-think their production strategy.
**Bruce Dehm is an agricultural
economist at Dehm Associates LLC and chairman of the
mpnnow.com