RME1 Future Risk Management Education Opportunities with CSREES/USDA Donald A. West

RME2 RME Activities Must Lead to: Well-informed Agricultural Producers Making Optimal Risk Management Decisions.

RME3 Remember the Basics: RME is based on Foundations established by Agr. Economists over the past 30 years. – Risk-taking is part of Life; Profits are a return to taking risks; Risk-taking is not all bad. – Managing Risk has been a part of Farm/Ranch (Business) Management (FBM) for decades. – Conceptual frameworks and applications established by John Ikerd & Kim Anderson, Gene Nelson, George Patrick, Roy Black, Art Barnaby, et. al. are relevant

RME4 Risk Management is One Component of FBM. However, Risk Management does have some unique characteristics – Based on the probability/likelihood that some (adverse) outcome will occur. – Decision-making requires assessment or judgments about the future.

RME5 Current Situation: Agricultural Production and Marketing have become much more Complex Agriculture has become segmented: bimodal/ trimodal, …. It is more competitive, with narrower (unit) profit margins Capital requirements are higher, with many more purchased inputs Rapid technological advances continue

RME6 RM Enhanced by FBM Advances Vastly improved Accounting Practices and Computer Technology Enterprise Analysis/Partial Budgeting Whole Farm Analysis Decision Aids

RME7 RM Tools have become More Plentiful, and More Complex – Many more Crop Insurance products and Revenue Insurance – Broader coverage for many more crops – Integrated Price Risk Tools – Government “farm program” provisions – More Liability and Health Insurance products

RME8 While the Dimensions of Risk have also increased World-wide trade with rapid adjustments Consumer awareness/preferences Environmental risks Legal, contract risks Human resource liabilities Information risks – overload and incomplete information

RME9 So What are the Challenges to RM Educators, and Researchers Fewer Customers (and fewer educators and researchers) with greater diversity and demands for RM assistance Less tolerance for time-lags between R&D and available tools– rapid communication Increasing demand for risk-management products, particularly from the livestock sector New technologies that complicate RM product development, and also enhance analysis and information sharing

RME10 Risk Management Areas Needing Further Development Livestock Insurance Products Multi-period Capital investment Risks. Transition Risks – Adding/deleting Enterprises – Moving in or out of the agricultural sector Financial/Social/Psychological Interfaces

RME11 Opportunities/Potential for RM Education and R&D Implications for agricultural producers NOT using RM techniques are greater than ever. RM will continue as a major component of strategic farm management Availability of effective RM tools and information technologies will increase

RME12 Cooperation with Private Sector is Essential to Leverage Efforts Base has been established beginning in Marginal returns far exceed marginal costs of cooperation “User-friendly” products and broad customer acceptance are critical for success

RME13 “CSREES Specifics” I’m retired!!!! – So, I’ll speak freely – But, there are no guarantees, The next FBM NPL in CSREES will have more influence

RME14 Some Assumptions Funding through CSREES ($5 million/yr.) will continue Regional Centers will play a major role The Competitive Process will prevail Collaboration and Joint Efforts will have advantages Performance and Visibility will be important

RME15 Some Recommendations Focus on the producer, targeting specific audiences Be creative, while building on RM basics Build constituencies through effective, efficient programming Be aware of ongoing programs, don’t duplicate Take advantage of joint efforts and collaboration Be diligent in proposal development and accountability

RME16 RME Approaches that may have Promise Greater use of Case Studies that have strong conceptual bases and application potential Further development of User-friendly Decision Aids Explore/revisit/adapt Capital Investment models Expand Multi-disciplinary approaches