Developing Personal Risk Management Plans Laurence M. Crane National Crop Insurance Services Albert Essel Delaware State University Henry English University of Arkansas—Pine Bluff Anthony Reed Alcorn State University 1

Project Overview Funding for this project was provided to National Crop Insurance Services (NCIS) through a competitively awarded Commodity Partnership Agreement from the USDA Risk Management Agency (RMA). NCIS is a not-for-profit national trade association located in Overland Park, Kansas, and is the primary service organization for the crop insurance industry. We (crop insurance industry) take very seriously the responsibility we have as the delivery system for the Federal crop insurance program. Recognize the value of working with others/educators in providing objective educational information. 2

Underlying Educational Philosophy A concentrated and hands-on approach to education typically leads to long-term behavioral change, and is consistent with the philosophy that behavior changes are more likely with sustained personal support. 3

Project Overview - Objectives The goal of this project was to assist Limited Resource and African American Producers of Specialty Crops and Underserved Commodities in Arkansas and Mississippi respond to risk in the five special emphasis areas of production, marketing, financial, legal, and human resource management. An applied education program consisting of workshops and individualized counseling was developed and conducted via a partnership of trainers, state host coordinators (SHC) and local educators (LE). 4

Project Overview - Objectives Specific project objectives were to use a business planning approach to: (1)Review risk management principles, practices, and tools to familiarize producers with how they can be effectively applied in a holistic approach to their farm situation, (2)Assist producers in conducting an effective risk assessment of their own farm business, (3)Inform producers of alternative risk management strategies, (4)Assist producers with formation and adoption of their own individualized risk response strategy, and, (5) Review the financial implications and legal considerations of their chosen strategy. These objectives were met through instruction, discussion, interactive group activities, and personal homework assignments. 5

Project Process - Structure Planning Formed project Steering Committee Project Director—Laurence Crane Project Co-Director—Albert Essel State Host Coordinators Arkansas—Henry English Mississippi—Anthony Reed Held face-to-face project Planning Meeting with follow-up conference calls Worked out project logistics Workshop locations, dates, promotion, etc. Identified personnel (Local Extension Educators) Needs assessment discussion—established priorities Determined workshop content, structure, and outcomes Established deadlines, responsibilities, expectations 6

Workshop Overview - Structure Workshops There were three structured workshops One month apart (approximately) Six hours each (9:00-4:00) Consisted of instruction, case demonstration, group discussion, interaction, and networking Same farmers came to all three workshops Individualized Study Homework assignments following each workshop Take approximately 20 hours to complete Assisted/supported by Local Educators (LE) Selected area(s) where you wish to focus 7

Workshop Overview - Outcomes 1. Be introduced to the farm business planning process and learn how to: Identify and list all of their farms assets and their productive capacity Determine the current wellbeing of the farm business Review the feasibility of alternative enterprises 8

Workshop Overview - Outcomes 2. Be introduced to five areas of risk and learn how to identify, measure, and mange risks on their farms in these areas: Production risks Marketing risks Financial risks Human resource risks Legal risks 9

Workshop Overview - Outcomes 3.Understand financial management of the farm and how to use financial statements and budgets to assess the performance of the farm business, and make better decisions. Income Statements Balance Sheets Enterprise budgets Cash flow budgets 10

Workshop Overview - Outcomes 4. Develop a personal risk management plan for your farm. Develop goals in each of the five risk areas Identify specific actions you will take to reach each goal Commit to follow through and implement the actions identified 11

Workshop Overview - Outcomes 5. Network with other producers in your area and learn from them as you discuss current issues of mutual importance. Share best management practices Develop network of peers Identify allied professionals who can support your risk management activities 12

Project Results - Summary The primary outcome of this educational effort was for participants to possess the skills and to understand their own operations well enough to develop personalized risk management strategies for each of the five emphasis areas (production, financial, marketing, legal, human). On the written evaluation form they reported spending an average of 22.4 hours per session for a total of 67.4 hours of personal homework. Moreover, each of the 52 participants established a goal in each of the five risk emphasis areas and delineated three specific actions they would take during the next year to reach each goal. 13

Project Results - Summa ry A secondary outcome of this project was to develop and foster a long-term working relationship between the farmer participants and the local educators (Extension Associates). Moreover, this educational approach also improves the skills of these educators. The personal interaction of these farmers with the local Extension Associates as designed in this project has the potential of creating long-lasting relationships that will be mutually beneficial. 14

Project Results - Summary One very important indicator of success was the strong participation by the participants who returned each time and actively participated in each of the three workshops. At the conclusion of the last workshop several farmers commented orally and on the written evaluation form that they were grateful for the opportunity to participate, had learned more than expected, and wished the series could continue on a regular basis. 15

Farmer and Rancher Testimonials “This is what I learned from the risk management class. The first exercise was one of the best I had, because it helped me realize I really didn’t know what I had for assets. The lesson for that week was to go home and look at everything and do an inventory and see what assets you have. What I learned really surprised me. This was a really great class to do. I learned about risk management, and about asset and liability management. I would tell everybody—If you are into farming, you need to take this class.” 16 Keith January, Sr., Fayette, Jefferson County, Mississippi

Farmer and Rancher Testimonials “This workshop has been most helpful to me because I have learned the different aspects of risk management on a farm. There are great aspects of record keeping, and financial record keeping is one of the most important things in taking care of the business on the farm.” 17 Sandra Bennett, Madison County, Mississippi

Farmer and Rancher Testimonials “I enjoyed participating in the workshops. I learned a lot about business planning as well as risk and goal setting and asset management; basically what is being looked at by bankers and other people these days in agriculture. I’m glad I participated in the program and thankful that Alcorn State University invited me to participate and it should be very beneficial to me.” 18 Louis Sanders, Mound Bayou, Bolivar County, Mississippi

Arkansas Participants 19

Mississippi Participants 20

Involved Local Extension Educators 21

Traditional classroom instruction was an important part of each workshop 22

Formed small groups by commodities 23

Small groups learned from each other, and developed networking opportunities 24

Workshop leaders monitored individual discussions and helped maintain focus 25

Participants challenged, yet strengthened each other during their discussions 26

Provided one-on-one instruction and assisted the small group discussions 27

Required writing and individual work 28

Extension Educators followed up with the farmers they recruited to participate 29

Recognized their accomplishment by providing Graduation Certificates 30

Keys to Success Formed and worked with Steering Committee Involved local Extension Educators Conducted needs assessment of producers Tailored workshop content to local needs/interest Participant involvement; discussion; writing Followed up on an individual basis to provide encouragement and assistance Required active participation by attendees Required accountability at each phase of project Recognized participant accomplishments 31

Project Challenges/Improvements Meeting current needs at individual level The good and bad of homogeneity Motivating personal action—writing is critical More involvement of local allied professionals (lenders, insurance agents, estate planners, etc.) Maintaining focus Continue the relationship after the funding has ended 32

Project Challenges/Improvements Comments Questions Discussion 33