Farm Risk Management Joseph Bonelli Department of Extension College of Agriculture and Natural Resources University Of Connecticut 1

Successful Business Owners Have vision Have excellent people skills Consider the options and risks Understand the importance of alliances and networks 2

Successful Business Owners Have superior financial, production and time management systems in place Have a complementary advisor team Have balanced management skills 3

Risk Management Why Manage Risk? Farming is a high-risk venture that brings with it many uncertainties Farm profitability is directly related to how well your business can handle these risks 4

What Risks Need to be Managed Production Marketing Financial Legal Human Resource 5

Options Available to Manage Risk Avoid Risk – Example: Grow an alternative crop Transfer Risk – Example: Purchase crop insurance Reduce the Risk – Example: Crop Diversification Retain the Risk – Example: Positive connection between risk and net return 6

Risk Management Strategies The key is to select strategies that meet the goals of your farm. A few, but certainly not all, are: Purchase Crop Insurance Develop Business Plans Consider Enterprise Diversification Develop an Estate Plan Seek Professional Assistance 7

Insurance Options Buying business insurance is among the best ways to prepare for the unexpected Consider the following questions: 1.Could my farm continue if a disaster hit my farm? 2.Could my farm withstand a liability claim? 3.Could my farm continue if my crops failed? 8

More Questions 4. Could my farm continue if a key person in the business died or became disabled? 5. If an employee is hurt on the farm, do I have proper worker’s compensation insurance? 6. Have a considered someone hacking into my farm’s social media presence? 9

Other Considerations 1.Talk to a licensed insurance agent 2.Talk with your attorney about your risk concerns 3.Make sure your agent always knows what you are doing and how you are operating your farm 10

Other Considerations 4. You do not want to hear “That is not covered” when you file a claim 5. Do not assume your homeowners insurance policy will cover any aspect of your business 6. Shop and compare price, policies and service, but remember, the least expensive policy might not be the best when you file a claim 11

Crop Insurance USDA RMA offers a federally subsidized crop insurance program through private insurance carriers Crop Insurance covers disasters such as » Drought » Hail » Frost/freeze » Excessive moisture » Fire » Hurricanes » Insect & plant disease » Wildlife damage 12

Crop Insurance Eligible crops in Connecticut include fresh market sweet corn, corn, peaches, apples, tobacco, nursery crops and potatoes Other crops may be eligible for coverage through a written agreement 13

Crop Insurance Revenue plans such as AGR and AGR-Lite are also available The Non-insured Crop Assistance Program (NAP) available from FSA 14

Business Liability Insurance A farmer is liable if their action or inaction results in personal injury to another person or another’s property Many businesses buy general liability insurance to cover claims of negligence Make sure your agent knows: » What you are selling » What you are doing (such as delivering shares off site) » What shareholders are doing such as u-pick » The extent that shareholders visit and/or take part in farm activities 15

Property Insurance Property covers losses due to fire and other perils Perils covered and exclusions may differ between policies and carriers 16

Health Insurance Health insurance covers expenses the result from illness, accidents or injuries that occur 17

Worker’s Compensation Insurance Connecticut requires employers to obtain worker’s compensation insurance This type of insurance provides wage replacement benefits and medical treatment for employees who have been injured or who have become ill due to work related injury or illness The amount of coverage and the employees that must be covered must be discussed with your insurance agent Make sure to discuss employer obligations if you have interns, volunteers or students working on the farm 18

Disability Insurance Disability insurance provides income to you or your employee if you or they can not work due to a covered event, including illness or injury This is not mandatory It could be the farmers biggest risk 19

Life Insurance Use as part of continuation, estate and/or succession plan Consider the following questions: » What are you trying to accomplish with life insurance? » Could the same thing be accomplished by other means? » Will my family be burdened financially by my death? 20

Your Current Risk Management Plan ? Is the plan adequate to manage the increased risk exposures of the current year? Are you prepared to live-with the business plan interruptions that would occur if a sizable loss/disaster occurred? What is the deadline for making the needed changes to it? What Action do you plan to take and when? Remember it’s your responsibility to develop the plan…and to live with the consequences of the plan 21

Thank You Questions? “This institution is an equal opportunity provider.” 22