Farmers are facing a variety of external risks in the ever-evolving world of agriculture. These risks are a product of the rapidly changing agricultural landscape and are largely out of your control — such as climate change, inflation and geopolitical issues. However, each of these risks has a significant impact on your operation.
Climate change is one of the most prominent external threats to your farm, altering growing conditions and increasing harvest unpredictability. Inflationary pressures, fluctuating interest rates and volatile commodity prices are also leaving many farmers struggling to maintain profitability.
You need to adapt quickly to safeguard your crops and income, and managing farm business risk has become a keystone of success for growers across B.C. Understanding how to identify and mitigate risks is more important than ever as the agriculture industry grapples with uncertainty.
Financial mismanagement can cause cash flow issues, increased debt and missed growth opportunities.”
Why is it important to manage internal risks
While it may be tempting to focus on external risks, it is vital to pay equal attention to the internal risks facing your operation. Not committing to run your farm like a business creates its own set of risks and problems.
Financial mismanagement can cause cash flow issues, increased debt and missed growth opportunities. Inadequate people management can hinder your farm’s growth and stability. Finally, a lack of future planning may result in your farm reacting to challenges instead of proactively preparing for them
How to build a risk management toolbox
It is crucial to arm yourself with a variety of tools and strategies to mitigate both external and internal risks to your farm. Building a solid risk management toolbox can provide the framework for navigating both predictable and unexpected challenges.
Business and financial management: A commitment to effective business and financial management is essential for long-term sustainability. This includes tracking key performance indicators, setting realistic financial goals, creating budgets and monitoring costs.
Diversification and innovation: Exploring new markets, diversifying crops or introducing innovative farming practices can help reduce dependency on a single source of income. Innovation could mean integrating technology into farming, experimenting with new varieties or adjusting production practices to reduce costs or improve yields.
Investing in insurance: Insurance is a cornerstone of any risk management strategy. Farmers should consider a range of insurance options, including crop insurance, property insurance and life and disability coverage.
Leveraging government programs and funding: Farmers can access critical funding for climate adaptation, infrastructure improvement and market expansion through a variety of programs. This includes the B.C. Enhanced Replant Program, B.C. Tree Fruit Climate Resiliency Program and B.C. Agriculture and Food Export Program.
The Advanced Payment Program (APP) can provide necessary cash flow while you are waiting for your crop to be marketed and sold. AgriStability protects farmers against large declines in farming income for reasons such as production loss, increased costs and unfavourable market conditions.
Additionally, advisors can offer insight on everything from business decisions to farming practices. Surrounding yourself with a team that includes financial professionals, legal advisors and industry consultants can help guide decision-making while allowing you to focus on what you know best — farming.
Take the next steps
The path to sustainability and resilience in B.C.’s agricultural sector begins with a clear understanding of the external and internal risks that farmers face. Utilizing a robust risk management toolbox can help you safeguard your operations against uncertainty and position your farm for success. ■
Tori Keiffer is a senior manager at MNP Kelowna specializing in wineries and agricultural services. Find them at MNP.ca