2009 Agricultural Risk Management Survey Outline
Summary of
2009 Agricultural Risk Management Survey “Why Invest in Agri-Food?” Conference Ag & Food Council
Calgary, Alberta November 17, 2010
Dale A. Kaliel Sr. Economist: Production Economics Economics & Competitiveness Division
Outline • ARMS – Why? • Context for “risk” • Survey findings: – Demographics – Risk perceptions, sources & impacts – Methods used to manage risk – Business plans & management tool use – Information & skill development needs – Self-directed vs. program reliance 2009 Alberta Risk Management Survey
1
ARMS – Why? • From ARD’s Business Plan … : – Facilitate producers’ ability to manage risk – Better understand “risks” facing producers – Measure “improvements” in risk management
2009 Alberta Risk Management Survey
Risk in Context • Risk – at the business level: – Is “personal” … ie. balance of individuals’: • • • •
Market conditions Production conditions / capabilities Economic outcomes Preferences
– Perceived profit opportunity & associated risks drives business choices
2009 Alberta Risk Management Survey
2
Risk in Context • Risk – at the industry level: – Observed behavior of the “aggregate” ie. distributions by characteristic, eg.: • Age; gender; experience • Sector / industry • Supply chain participants
– Understanding both “reward (profit) & risk” is key
2009 Alberta Risk Management Survey
Fundamentals What is Risk? Risk is: • “an uncertain event or condition that, if it occurs, has a positive or negative effect ”
• Because risk has both upside & downside, it becomes a “driver of growth” …
Risk has two components:
• Risk is then to be strategically managed to affect business change.
• probability – likelihood , and • impact – potential outcomes and their consequences
• The better a business is at coping with/benefiting from risk, the more likely it is to “grow” over time.
… these give economic relationships probability characteristics 2009 Alberta Risk Management Survey
3
Demographics • Alberta – General • Region • Farm type • Age • Farming experience • Education • Gender
2009 Alberta Risk Management Survey
AB – by region
2009 Alberta Risk Management Survey
4
AB – by farm type
2009 Alberta Risk Management Survey
AB – by age group
2009 Alberta Risk Management Survey
5
AB – by farming experience
2009 Alberta Risk Management Survey
AB – by education
2009 Alberta Risk Management Survey
6
Demographics • Alberta – Business Indicators • Business structure • Gross farm income • Debt / Equity% • Change in net farm income • Future intentions
2009 Alberta Risk Management Survey
AB – by business structure
2009 Alberta Risk Management Survey
7
AB – by gross farm income class
2009 Alberta Risk Management Survey
AB – by change in net income
2009 Alberta Risk Management Survey
8
AB – by future intentions
2009 Alberta Risk Management Survey
Demographics Why Invest in Agri-Food? • upside – Considerable “assets” coming available to: • Re-invest / restructure businesses • Expand scale & scope of businesses
• downside – Considerable “assets” coming available … effective transfer of assets is critical – Loss of experience / human capital 2009 Alberta Risk Management Survey
9
Sources & Impacts; Perceptions • Alberta – Total • Understand sources of risk & impact on income • Change in net farm income, attributed to source • Effect of variability on net farm income & production choices • Future intentions • Risk acceptance • Risk comparable to peers
2009 Alberta Risk Management Survey
AB – understand sources of risk & impact on income
2009 Alberta Risk Management Survey
10
AB – change in NFI attributed to variability vs trend
2009 Alberta Risk Management Survey
AB –variability or trend – effect on bsns sustainability by source
2009 Alberta Risk Management Survey
11
AB –impact of variability on production decisions, future
2009 Alberta Risk Management Survey
AB –sources, properly managed, to have the most positive impact on NFI, future
2009 Alberta Risk Management Survey
12
AB – intended change in business scale, next 3 years
2009 Alberta Risk Management Survey
AB – intended change in business strategy, next 3 years
2009 Alberta Risk Management Survey
13
AB – by risk acceptance
2009 Alberta Risk Management Survey
Risk acceptance - By type of operation
2009 Alberta Risk Management Survey
14
Risk acceptance - By age class
2009 Alberta Risk Management Survey
Risk acceptance - By gross farm income
2009 Alberta Risk Management Survey
15
Sources & Impacts; Perceptions Why Invest in Agri-Food? • upside – Incoming generation more likely to pursue change; accept & manage risk? – Production mix, business strategy. scale & cost efficiency recognized as key?
• downside – Will required information management & business management skills keep pace? 2009 Alberta Risk Management Survey
Methods Used for Managing Variability • Alberta Total – Crop production / productivity – Livestock production / productivity – Sale price – Input expense
2009 Alberta Risk Management Survey
16
AB – methods used to manage crop production variability
2009 Alberta Risk Management Survey
AB – methods used to manage livestock production variability
2009 Alberta Risk Management Survey
17
AB – methods used to manage sale price variability
2009 Alberta Risk Management Survey
AB – methods used to manage input expense variability
2009 Alberta Risk Management Survey
18
Methods Used for Managing Variability Why Invest in Agri-Food? – Production management measures used to manage production variability – price & expense variability management weighted to older, more conservative approaches … but newer, “cooperative” &/or knowledge-based measures have a distinct presence – Still a large focus on managing production vs. business & risk management
2009 Alberta Risk Management Survey
Business Plans & Management Tools • Alberta Total – Business Plans • Risk components
– Farm management tools • Use • Impact
2009 Alberta Risk Management Survey
19
Incidence of written business plans – AB & gross farm income class
2009 Alberta Risk Management Survey
AB – business plans w/ risk management components
2009 Alberta Risk Management Survey
20
AB – business plans w/ risk management components – ’09 vs. ‘06
2009 Alberta Risk Management Survey
AB – use of farm management tools – ’09 vs. ‘06
2009 Alberta Risk Management Survey
21
AB – impact of management tool use – ’09 vs. ‘06
2009 Alberta Risk Management Survey
Business Plans & Management Tools Why Invest in Agri-Food? – Formal business planning processes, particularly with a risk management focus, are becoming more common – Businesses are seeking out & using management tools to improve the effectiveness of their business & risk management decision making
2009 Alberta Risk Management Survey
22
Information, Tool & Skill Dev’t Needs • Alberta Total – Is there a need for: • Information? • Tools? • Training/skill development?
– How is it best delivered?
2009 Alberta Risk Management Survey
Need for tools, info & training – by age & gross farm income class
2009 Alberta Risk Management Survey
23
Need for tools, info & training – by service need
2009 Alberta Risk Management Survey
Preferred method of learning, by mode or source - AB
2009 Alberta Risk Management Survey
24
Information, Tool & Skill Dev’t Needs Why Invest in Agri-Food? – There is a “hunger” amongst primary businesses to “manage” vs. produce …
2009 Alberta Risk Management Survey
Who will manage risk? • Alberta Total – Rely on own, self-directed risk management or a “farm program”
2009 Alberta Risk Management Survey
25
Self directed risk management vs. AgriStability – by farm type - AB
2009 Alberta Risk Management Survey
Self directed risk management vs. AgriStability – by future intentions - AB
2009 Alberta Risk Management Survey
26
Self directed risk management vs. AgriStability – by risk acceptance - AB
2009 Alberta Risk Management Survey
Who will manage risk? Why Invest in Agri-Food? – Businesses prefer to pursue self-directed risk management activities, with some varying degree of reliance on general farm programs
2009 Alberta Risk Management Survey
27
2009 Ag Risk Management Survey
Thank You!
2009 Alberta Risk Management Survey
28
2009 Agricultural Risk Management Survey “Why Invest in Agri-Food?” Conference Ag & Food Council
Calgary, Alberta November 17, 2010
Dale A. Kaliel Sr. Economist: Production Economics Economics & Competitiveness Division
Outline • ARMS – Why? • Context for “risk” • Survey findings: – Demographics – Risk perceptions, sources & impacts – Methods used to manage risk – Business plans & management tool use – Information & skill development needs – Self-directed vs. program reliance 2009 Alberta Risk Management Survey
1
ARMS – Why? • From ARD’s Business Plan … : – Facilitate producers’ ability to manage risk – Better understand “risks” facing producers – Measure “improvements” in risk management
2009 Alberta Risk Management Survey
Risk in Context • Risk – at the business level: – Is “personal” … ie. balance of individuals’: • • • •
Market conditions Production conditions / capabilities Economic outcomes Preferences
– Perceived profit opportunity & associated risks drives business choices
2009 Alberta Risk Management Survey
2
Risk in Context • Risk – at the industry level: – Observed behavior of the “aggregate” ie. distributions by characteristic, eg.: • Age; gender; experience • Sector / industry • Supply chain participants
– Understanding both “reward (profit) & risk” is key
2009 Alberta Risk Management Survey
Fundamentals What is Risk? Risk is: • “an uncertain event or condition that, if it occurs, has a positive or negative effect ”
• Because risk has both upside & downside, it becomes a “driver of growth” …
Risk has two components:
• Risk is then to be strategically managed to affect business change.
• probability – likelihood , and • impact – potential outcomes and their consequences
• The better a business is at coping with/benefiting from risk, the more likely it is to “grow” over time.
… these give economic relationships probability characteristics 2009 Alberta Risk Management Survey
3
Demographics • Alberta – General • Region • Farm type • Age • Farming experience • Education • Gender
2009 Alberta Risk Management Survey
AB – by region
2009 Alberta Risk Management Survey
4
AB – by farm type
2009 Alberta Risk Management Survey
AB – by age group
2009 Alberta Risk Management Survey
5
AB – by farming experience
2009 Alberta Risk Management Survey
AB – by education
2009 Alberta Risk Management Survey
6
Demographics • Alberta – Business Indicators • Business structure • Gross farm income • Debt / Equity% • Change in net farm income • Future intentions
2009 Alberta Risk Management Survey
AB – by business structure
2009 Alberta Risk Management Survey
7
AB – by gross farm income class
2009 Alberta Risk Management Survey
AB – by change in net income
2009 Alberta Risk Management Survey
8
AB – by future intentions
2009 Alberta Risk Management Survey
Demographics Why Invest in Agri-Food? • upside – Considerable “assets” coming available to: • Re-invest / restructure businesses • Expand scale & scope of businesses
• downside – Considerable “assets” coming available … effective transfer of assets is critical – Loss of experience / human capital 2009 Alberta Risk Management Survey
9
Sources & Impacts; Perceptions • Alberta – Total • Understand sources of risk & impact on income • Change in net farm income, attributed to source • Effect of variability on net farm income & production choices • Future intentions • Risk acceptance • Risk comparable to peers
2009 Alberta Risk Management Survey
AB – understand sources of risk & impact on income
2009 Alberta Risk Management Survey
10
AB – change in NFI attributed to variability vs trend
2009 Alberta Risk Management Survey
AB –variability or trend – effect on bsns sustainability by source
2009 Alberta Risk Management Survey
11
AB –impact of variability on production decisions, future
2009 Alberta Risk Management Survey
AB –sources, properly managed, to have the most positive impact on NFI, future
2009 Alberta Risk Management Survey
12
AB – intended change in business scale, next 3 years
2009 Alberta Risk Management Survey
AB – intended change in business strategy, next 3 years
2009 Alberta Risk Management Survey
13
AB – by risk acceptance
2009 Alberta Risk Management Survey
Risk acceptance - By type of operation
2009 Alberta Risk Management Survey
14
Risk acceptance - By age class
2009 Alberta Risk Management Survey
Risk acceptance - By gross farm income
2009 Alberta Risk Management Survey
15
Sources & Impacts; Perceptions Why Invest in Agri-Food? • upside – Incoming generation more likely to pursue change; accept & manage risk? – Production mix, business strategy. scale & cost efficiency recognized as key?
• downside – Will required information management & business management skills keep pace? 2009 Alberta Risk Management Survey
Methods Used for Managing Variability • Alberta Total – Crop production / productivity – Livestock production / productivity – Sale price – Input expense
2009 Alberta Risk Management Survey
16
AB – methods used to manage crop production variability
2009 Alberta Risk Management Survey
AB – methods used to manage livestock production variability
2009 Alberta Risk Management Survey
17
AB – methods used to manage sale price variability
2009 Alberta Risk Management Survey
AB – methods used to manage input expense variability
2009 Alberta Risk Management Survey
18
Methods Used for Managing Variability Why Invest in Agri-Food? – Production management measures used to manage production variability – price & expense variability management weighted to older, more conservative approaches … but newer, “cooperative” &/or knowledge-based measures have a distinct presence – Still a large focus on managing production vs. business & risk management
2009 Alberta Risk Management Survey
Business Plans & Management Tools • Alberta Total – Business Plans • Risk components
– Farm management tools • Use • Impact
2009 Alberta Risk Management Survey
19
Incidence of written business plans – AB & gross farm income class
2009 Alberta Risk Management Survey
AB – business plans w/ risk management components
2009 Alberta Risk Management Survey
20
AB – business plans w/ risk management components – ’09 vs. ‘06
2009 Alberta Risk Management Survey
AB – use of farm management tools – ’09 vs. ‘06
2009 Alberta Risk Management Survey
21
AB – impact of management tool use – ’09 vs. ‘06
2009 Alberta Risk Management Survey
Business Plans & Management Tools Why Invest in Agri-Food? – Formal business planning processes, particularly with a risk management focus, are becoming more common – Businesses are seeking out & using management tools to improve the effectiveness of their business & risk management decision making
2009 Alberta Risk Management Survey
22
Information, Tool & Skill Dev’t Needs • Alberta Total – Is there a need for: • Information? • Tools? • Training/skill development?
– How is it best delivered?
2009 Alberta Risk Management Survey
Need for tools, info & training – by age & gross farm income class
2009 Alberta Risk Management Survey
23
Need for tools, info & training – by service need
2009 Alberta Risk Management Survey
Preferred method of learning, by mode or source - AB
2009 Alberta Risk Management Survey
24
Information, Tool & Skill Dev’t Needs Why Invest in Agri-Food? – There is a “hunger” amongst primary businesses to “manage” vs. produce …
2009 Alberta Risk Management Survey
Who will manage risk? • Alberta Total – Rely on own, self-directed risk management or a “farm program”
2009 Alberta Risk Management Survey
25
Self directed risk management vs. AgriStability – by farm type - AB
2009 Alberta Risk Management Survey
Self directed risk management vs. AgriStability – by future intentions - AB
2009 Alberta Risk Management Survey
26
Self directed risk management vs. AgriStability – by risk acceptance - AB
2009 Alberta Risk Management Survey
Who will manage risk? Why Invest in Agri-Food? – Businesses prefer to pursue self-directed risk management activities, with some varying degree of reliance on general farm programs
2009 Alberta Risk Management Survey
27
2009 Ag Risk Management Survey
Thank You!
2009 Alberta Risk Management Survey
28
