Agricultural and Food Policy Center at Texas A&M University (AFPC) released a publication to help ranchers address potential risks.
“Agricultural producers face a litany of risks, from natural disasters to market forces that are far beyond their control,” Bart Fischer, AgriLife assistant professor and co-director of the Agricultural & Food Policy Center at Texas A&M University, said. “At the moment, over half the United States is facing some level of drought, and the cost of inputs have wreaked havoc on agricultural producers over the past year. Unfortunately, in particular, livestock producers historically have had few tools at their disposal for managing risk, largely relying on maintaining animal health and managing costs to stay afloat, in addition to limited use of futures and options.”
The new publication, Where’s the Risk?: A Livestock Risk Management Handbook, was authored by Fischer. Co-authors were Justin Benavidez, assistant professor and Texas A&M AgriLife Extension Service economist at the Texas A&M AgriLife Research and Extension Center in Amarillo, and Amy Hagerman, assistant professor and Oklahoma Cooperative Extension Service specialist at Oklahoma State University.
Fischer noted future options, exchange-traded contracts that provide price protection for ranchers, is one risk management option.
“While use of futures and options by cattle producers continues to be quite low, a number of other risk management tools have been made available to livestock producers,” Fischer said. “In this handbook, we endeavor to provide an overview of those tools.”
He said while most of these tools are broadly applicable to a number of different species, the focus primarily is on cattle.
“And because livestock ownership and forage production often go hand in hand, this handbook covers both topics,” Fischer said.
The publication includes information on the futures markets, which provide buyers and sellers of commodities with the opportunity to establish prices for future delivery.
The 47-page publication includes programs offered by the U.S. Department of Agriculture’s (USDA) Farm Service Agency, the USDA’s Risk Management Agency and risk management using the futures market
The publication also includes a checklist for ranchers to use in evaluating the various options at their disposal.
“Our hope is that producers will take the opportunity to avail themselves of the litany of tools that are available,” Fischer said.
Download the handbook here.