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Future Risk Management Education Opportunities with CSREES/USDA

Future Risk Management Education Opportunities with CSREES/USDA. Donald A. West. RME Activities Must Lead to:. Well-informed Agricultural Producers Making Optimal Risk Management Decisions . . Remember the Basics:.

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Future Risk Management Education Opportunities with CSREES/USDA

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

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

  3. 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 RME

  4. 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. RME

  5. 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 RME

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

  7. 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 RME

  8. 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 RME

  9. 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 RME

  10. 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 RME

  11. 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 RME

  12. Cooperation with Private Sector is Essential to Leverage Efforts • Base has been established beginning in 1996. • Marginal returns far exceed marginal costs of cooperation • “User-friendly” products and broad customer acceptance are critical for success RME

  13. “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 RME

  14. 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 • Performanceand Visibility will be important RME

  15. 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 RME

  16. 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 RME

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