By Andi Anderson
Decisions in cattle operations carry significant weight, with consequences often unfolding over time. Raising livestock and growing feed involve biological complexities, adding an element of uncertainty to every choice. From bringing a calf to market to waiting for a heifer's first offspring, operations face both immediate market fluctuations and long-term trends.
Risk, the combination of likelihood and impact, comes in many forms. Production risks like yield and weight, market risks like price and trade, institutional risks like property rights and policy, personal risks like injury and theft, and financial risks like interest rates and loans all play a role.
In this complex landscape, two key strategies emerge: risk transfer and risk mitigation.
Risk Transfer: This involves shifting the burden of risk. For example, a drought could threaten hay production, but purchasing Pasture, Rangeland, and Forage (PRF) insurance transfers that risk to the insurer. Other tools include futures, options, forward contracts, and Livestock Risk Protection (LRP) insurance.
Risk Mitigation: This focuses on minimizing damage and mitigating risks through best practices. Before PRF insurance, building hay reserves and storing hay properly were essential risk mitigation strategies for droughts.
These strategies often work hand-in-hand. While PRF insurance provides a safety net, proactive measures like rotational grazing, soil testing, and diversifying forage crops further enhance resilience.
The key is to be proactive. Reacting to crises is like buying a fire extinguisher while the kitchen burns; far less effective than preventing the fire in the first place. By adopting proactive risk management, livestock operations can build resilience, securing their ventures against both immediate and long-term challenges.
Photo Credit: gettyimages-jessicahyde
Categories: Ohio, Business, Livestock, Beef Cattle