Thursday, December 7, 2023

Risk management a key skill for farmers

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Strategy must aim to maximise results and minimise consequences, Lincoln forum hears.
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Farmers are having to keep a lot of balls in the air when making production system decisions, but it is important to identify risk and manage it.

This was the message from speakers at a recent agri-industry science forum.

The New Zealand Institute of Agricultural and Horticultural Science forum at Lincoln University focused on building resilient production systems.

In his address to the forum, Jon Manhire of The Agribusiness Group said planning for resilience is about risk management.

“Focusing on risk is a really good way of building resilience and risk can create opportunities.

“Risk management is not a new concept, it aims to maximise results and minimise consequences. Resilience is the capacity to bear risk.

“It is important to identify risk and manage it or you won’t be around in the future,” he said.

Natural hazards are relatively low on the list of reasons businesses fail.

Manhire presented figures showing key reasons for failure are: economic factors, 47%; financial troubles such as excessive debt, operating expenses and insufficient capital, 38%; inexperience, 7%; owner neglect, including business conflicts, family problems and poor work habits,  4%; and other, including natural disasters, 3%.

“We are in a world where farmers really have to manage their own risk as best as possible in their own business, as farming is so variable across sectors and within sectors.

“Individual businesses and farm systems are driven by any number of reasons, but strategic response is key, rather than proactive response.”

Risks can be identified, evaluated and prioritised at a farm or sector scale. 

When preparing a situational analysis consider the PESTE framework – political, economic, social, technological and environmental dimensions – and rank potential strategic risks.

“It needs to be an input into a strategic planning process and updated regularly to ensure that it is responsive to changing conditions with active monitoring, evaluation and management for predicting future risks.”

There is a need for the development and promotion of case studies, tools and specialist skills, as well as chief risk officers to help agribusiness identify and manage risks.

“Chief risk officers in global businesses have taken the science of risk management to another level. There’s a gap there in relation to NZ’s capability,” Manhire said.

GNS principal social scientist Nick Craddock-Henry said building resilience in rural communities and the industries they support is about choice. At some point, he said, current practice will no longer be sufficient.

“Resilience is driven by complex interconnected factors, many of which are driven by factors beyond NZ shores.

“A systems perspective is needed. We need to choose to invest in resilience, identify thresholds and tipping points, account for interactions and have flexibility in planning, and be able to anticipate uncertain or novel change.

“There are options but no silver bullets. 

“We can use the past as a guide to the future and challenge the way of our own thinking, but what resilience means to individuals for what end is what will drive investment.”

Building resilience into high-value export and domestic cropping systems is a juggling act for farmers, Foundation for Arable Research senior researcher Jo Drummond said.

“Farmers are increasingly being asked to grow more with fewer tools.

“We can already grow more on less land. We can also grow more with less chemistry.”

But is it enough?

“Our system in NZ is very much dominated by the stick, not the carrot.

“Our growers aren’t incentivised with grants and subsidies. This makes it harder for our exporters so the impetus is to only change when you have no other choices, which is a difficult road as opposed to voluntary change, which requires more thought, but allows for greater readiness and flexibility.”

The challenge is with the breeders and plant-breeding technologies.

“To reduce our footprint we need to rationalise each application, conserve, protect and support.

“We need effective use of plant genetics, cultivar selection, integrating new crop protection technologies, rationalising chemical pesticides programmes – genetic diversity in a mix, but also in a monoculture.

“Some time we need to take the plunge and take all our growers on the agroecology systems journey. It needs some big thinking and some big support,” Drummond said. 

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