Professional Documents
Culture Documents
http;\\www.csu.edu.au/faculty/sciagr/rman/afbmnetwork/afbmjournal/index.htm page 23
AFBM Journal volume 4 – numbers 1 & 2 © Copyright Charles Sturt University
page 24 http;\\www.csu.edu.au/faculty/sciagr/rman/afbmnetwork/afbmjournal/index.htm
AFBM Journal volume 4 – numbers 1 & 2 © Copyright Charles Sturt University
The three groups were judged to have these interviews are summarised in the
the same level of skills in farm business following set of dot points:
management. • Weather variability (reflected in
• The less educated group (those who had production risk) was often the first source
only completed primary school or part of of risk that respondents mentioned.
secondary school), had been involved in • Financial risk was regarded by
farming and managing farm businesses respondents as the “automatic follow-on”
for longer than the mid-level education from variability in production caused by
group (those who had completed weather variability.
secondary school, TAFE, or agricultural
• Market prices and changes in policy were
college). The same observation could be
seen as very unpredictable, to the point
made about the more highly educated
that respondents felt they usually had no
group (those having tertiary or
control over these risks.
postgraduate level qualifications).
• Personal risk was often ignored by
• The low and mid-level education groups
farmers, although one respondent
regarded themselves as more
commented that it might become a major
conservative and traditional.
concern in the Upper Eyre Peninsula in
• The more highly educated group were the near future. Of particular concern was
more likely to take risks in trying new the reduction in the number of people
farming technology such as better continuing to live in rural areas and the
chemicals and new machinery. need for farm succession planning.
• Generally, the more highly educated • Improved financial, computing, and
group had better skills in computing, business management skills have helped
grain marketing, and farm business some farmers in this area cope with risk
management. management problems. However, more
• Regardless of age or education level, training is required and farmers have to
respondents mostly agreed that be willing to undertake this.
marketing the grain they produced was • Practically, farmers have implemented
best left to specialists. Most of them also many strategies to manage the risks they
agreed that the key to successful farming face. Diversifying crop varieties and
lays in minimising costs. practicing zero or minimum tillage were
Selected interviews commonly used strategies to manage
To provide more specific information on these production risks. Moreover, farmers often
points, selected interviews were conducted planted minimal areas of risky crops
with several farmers in Upper Eyre Peninsula. (peas, canola, and vetch) and maximised
The objectives of this selective-interview the area of less risky crops (wheat) to
approach were: minimise the consequences.
• to report how individual farmers defined • Maintaining high equity in the farm and
risk; making off-farm investments were the
most frequently used strategies to
• to gain information directly from farmers
manage financial risks. Other commonly
about the sources of risk they face and
used strategies included gross margins
compare that with what was described in
planning and investing surplus cash in
the literature;
farm management deposits.
• to find out whether the characteristics
• The strategy most commonly used by
listed of farmers described previously
farmers to manage marketing risk was
reflected Eyre Peninsula farmers’
“to leave it to the experts”. Farmers
attitudes towards risk; and
shared a common perception that it was
• to record the practical strategies that better for them to focus on things they
farmers in that area have been using to knew they were good at (e.g. improving
manage farming risks. yields) rather than staying in the office
An introductory letter listing some issues for and studying forward prices, and
discussion was sent to each farmer in marketing contracts. They thought these
advance of the interview. Enclosed with this were jobs that should be left to
letter, as background reading, was a draft specialists. They also preferred keeping
copy of the study report. Some important stocks of grain for high-priced times.
parts of this draft were highlighted to attract In summary, it was concluded from this study
the farmers’ attention. The interviews were that farming risks are an accepted reality in
undertaken in the farmers’ homes rural Australia and the Upper Eyre Peninsula
(approximately one week after they received in South Australia was no exception in that
the documents). The main findings from regard. As farmers have greater exposure to
http;\\www.csu.edu.au/faculty/sciagr/rman/afbmnetwork/afbmjournal/index.htm page 25
AFBM Journal volume 4 – numbers 1 & 2 © Copyright Charles Sturt University
risk than many other business people, the such as models, and information derived from
farmers in the Upper Eyre Peninsula appear modelling, were used by farmers to manage
to understand the risks they face and are well risks. They suggested that several risk
prepared to manage them. However, management strategies were being used by
favourable seasons and/or improved farming Queensland dryland farmers. These included
technologies can tend to hide the on-going maintaining a high level of equity, keeping
requirements for prudent risk management. overhead costs low, reinvesting profits into
Queensland case study: Farming risks in the farm business, diversifying activities,
southwest Queensland using conservative nitrogen fertiliser rates,
and using long fallows to build up stored soil
This study aims to evaluate and try to
moisture. Many of these strategies rely on
improve risk management strategies and
high levels of technical competence. Overall,
decision support tools for dryland farmers in
it was concluded that the risk management
southwest Queensland. The main objectives
strategies adopted by farmers were quite
of the study are:
similar in principle to those applied by most
• to review the current trends in the theory other risk averse managers.
and practice of risk management in
By and large, the preliminary interviews with
general and in agriculture in particular;
experts did give some insights into the
• to identify the sources of risk that direction of the study as well as helping to
farmers in southwest Queensland have to refine the research questions. The experts
face; interviewed all agreed that it would be
• to investigate the risk management essential before building a risk management
strategies currently employed by farmers program to conduct focus group discussions
in that area as well as find their interest or survey farmers to find out how they
in and attitudes towards risk perceive sources of farming risk and what
management; and if possible their current risk management strategies are.
• to help farmers cope better with the risks Preliminary interviews with farmers
they face, to assist them to make good In late November 2004, a presentation of this
decisions under risky conditions, and study was given to a group of farmers at
encourage them to apply appropriate risk Roma (centre of the study area) and some
management and decision support tools preliminary interviews were conducted with
in their farming businesses. some of them to understand how they were
The study is being undertaken as part of the managing their farms and identify problems
research for a Doctor of Philosophy degree at that they were facing.
The University of Queensland. In the first Several issues have emerged from the
year of this study, relevant literature was discussions with these farmers. First of all, it
reviewed partly in fulfilling the first objective. was claimed that risk is very difficult to
In the second year, several preliminary identify. In addition, farmers normally do not
interviews and focus groups discussions were know what the probabilities of particular
conducted and some results of these events occurring are. It was stressed that it
interviews and discussions are briefly is important to “get the timing right” as one
reported. That in part fulfils the second and of the essential features in risk management
third objectives of the study. and making planting decisions. Timeliness is
Preliminary interviews with experts important as one of the farmers said: “Every
It was recognised during the literature review time it rains, it brings income opportunities”.
phase that the study could benefit from Other farmers added: “Sometimes doing the
discussions with experts in the field who right thing is not as important as doing it at
might offer constructive comments and allow the right time”. This is true because as
refinement of the research questions. Gilovich and Griffin (2002) noted, successful
Consequently, in June 2004, a series of face- ideas must not only be good, but timely –
to-face and email interviews were conducted even lucky. It was largely agreed that
with staff from two of the principal research experience and preferences are very
and extension organisations in Australia, important in decision making. This relates
Commonwealth Scientific and Industrial especially to decisions regarding crop
Research Organisation (CSIRO) and planting. Generally, production risks were
Queensland Department of Primary Industries mentioned as the main source of farming risk
and Fisheries (QDPI&F). These people had and weather variability is the obvious factor
usually been working in agricultural risk driving this. Other sources of farming risk
management or related areas for many identified in the literature review were also
years. mentioned by farmers, but it seems that the
things that concern them most of all were
Interviewed experts shared a common what to grow and when to plant it. Finally,
understanding that very few formal ‘tools’
page 26 http;\\www.csu.edu.au/faculty/sciagr/rman/afbmnetwork/afbmjournal/index.htm
AFBM Journal volume 4 – numbers 1 & 2 © Copyright Charles Sturt University
owning machinery or using contractors was agreement that risk is anything that
another essential issue concerning many threatens farm enterprises. “Risk is
farmers since it has a big impact on something that would prevent you from
managing risk in this uncertain environment. gaining profit or profitable opportunities
In general, the discussions with these which you would expect to get”. All
farmers did not necessarily imply the participants accepted the fact that farming is
situation in the whole study area since the risky. “You can’t go into farming without risk.
discussions were conduced with a fairly small In other words, you can’t be a ‘no’ risk
number of farmers. However, they indicated farmer”.
what farmers were actually doing as well as Type of risk
describing their problems. As such, their Like the colours in the spectrum, the range of
comments could be used to provide guidance business risks contains many shades and
for the focus group discussions and design of variations. Generally speaking, the way
risk management and decision support tools scholars categorise sources of risk may
that were expected to occur in later stages of depend on the study objectives. Nonetheless,
this study. according to many authors, the main sources
Focus group discussions of risk in farming include production,
Focus groups were selected as the next step marketing, institutional, personal, and
in the research phase because they have financial risks (Boehlje and Trede 1977;
many advantages as a method of gathering Fleisher 1990; Hardaker et al. 1997; Kay and
qualitative data (Krueger and Casey 2000; Edwards 1999). These same sources of risk
Berg 2001; Coutts 2004). The main were mentioned by the participants in the
objectives of the focus group discussions group discussions; with many additional
were to explore the issues that could be comments made about how climatic,
studied, identify what risks farmers face, and personnel, business environment, and
learn how they deal with these problems. In government policy changes affected the risks
addition, it was hoped that we could assess they face.
farmers’ needs in regards to risk Participants were asked to select three
management and decision support tools and sources of risk that they considered most
learn how these needs might be met. important. Climatic variability was ranked as
Wolff et al. (1993) noted that the selection of the most important source of risk in both
participants for focus group discussion is discussion groups. This was followed by
typically purposive and based on suitability or financial and government policy risks in the
convenience rather than representativeness. first group and government policy and
In this study, the participants who were to be marketing risks in the second group.
asked to participate in the focus groups were Risk management strategies
suggested by QDPI&F staff, and were Farmers in this area (near Roma, southwest
considered relatively representative of Queensland) were using a range of strategies
farmers in the study area. Thus the to manage the types of risk that they face.
information that was generated by the These strategies included enterprise selection
discussions was generally applicable to the – having predominant cattle, with farming of
wider population in ways suggested by cash crops regarded as a complementary
Kennedy (1979). activity, and using different strategies to
Twenty-two invitation letters were sent to spread the risk. Participants said that: “In
potential participants and sixteen of them this area, at least you can sleep at night
agreed to participate in the discussions. This when you have cattle. Crops have to rely so
high rate of response (16 out of 22) reflects much on rain, which is very unreliable here”.
both the nature of the farmers selected and Most farmers were concentrating on growing
their interest in the topic. Following the crop rather than worrying about
suggestions for successful focus groups marketing it, and managing weather
(Morgan 1998; Krueger and Casey 2000), variability by conserving soil moisture and
participants were divided into two groups and using zero till planting. The common
the discussions were conducted on the same consensus among participants was that:
day (18 February, 2005). Each discussion “Given the water we have available, zero till
lasted approximately two hours. is the best way to reduce the risk of erosion
Definition of risk and water evaporation”. To manage
marketing risk, they were selling only part of
Generally, farmers’ definitions of risk are not
farm products at any one time. “You’d better
as long or as complicated as those used by
not to sell all your crops or cattle at one time
scholars, e.g. Hardaker et al. (1997),
because you can never be completely right”.
Williams and Schroder (1999), or Just et al.
Other risk management strategies mentioned
(2003). In the discussions with the two
included practising good business
groups of farmers, there was a general
http;\\www.csu.edu.au/faculty/sciagr/rman/afbmnetwork/afbmjournal/index.htm page 27
AFBM Journal volume 4 – numbers 1 & 2 © Copyright Charles Sturt University
page 28 http;\\www.csu.edu.au/faculty/sciagr/rman/afbmnetwork/afbmjournal/index.htm
AFBM Journal volume 4 – numbers 1 & 2 © Copyright Charles Sturt University
also thought marketing should be “left to Society, 47th Annual Conference, 12-14th
experts”, and only part of farm production February, 2003, Perth, Australia.
should be sold at any one time. Coutts J 2004, Interviews and focus groups: how
to make the most of talking with people when
In conclusion, management of risk is an
data collecting, The University of Queensland,
important activity for farmers worldwide. Gatton, Australia.
Different farmers confront different situations
Coventry DR, Holloway RE and Cummins JA 1998,
and their experience and preferences toward 'Farming fragile environments: low rainfall and
risk have a major effect on decision-making difficult soils in South Australia', Proceedings of
in each given situation. The management the 9th Australian Agronomy Conference, Wagga
task facing farmers is to choose a Wagga, NSW, Australia.
combination of strategies that best suits the Cox HW, Hammer G, McLean GB and King C 2004,
unique conditions of their particular farm and 'National WhopperCropper - risk management
personal circumstances. discussion support software', Proceedings of the
4th International Crop Science Congress,
Acknowledgements
Brisbane, Australia.
The authors would like to thank Jay Cummins Duncan R, Holden D, Hazell P and Pritchard A
for his excellent advice and help in providing 1991, 'Commodity price risk management and
the survey data in South Australia and Kathy financial markets', Risk in agriculture:
Snars for her assistance in conducting the proceedings of the Tenth Agriculture Sector
focus groups in southwest Queensland. All of Symposium, Washington DC, USA.
the farmers and experts are gratefully Fleisher B 1990, Agricultural risk management,
acknowledged for being involved so willingly Lynne Rienner Publishers Inc., Colorado, USA.
in the interviews and focus group discussions. Freebairn DM, Robinson JB and Glanville SF. 2002,
Financial support for the first case study 'Software tools for learning and decision support'
came from a Vietnamese Government [online], accessed: 6th April 2005, available at:
Scholarship and the GRDC project UA457. http://www.apsru.gov.au/apsru/Projects/wfs/pdf
The second case study has financial files/ModsimFreebairnGlanvilleRobinson.pdf.
assistance from an International Giles T and Stansfield M 1990, The farmer as the
Postgraduate Research Scholarship (IPRS) at manager, C.A.B International, Wallingford, UK.
The University of Queensland and the QDPI&F Gilovich T and Griffin D 2002, 'Introduction -
Western Farming Systems project. heuristics and biases: then and now', in Gilovich
T, Griffin D and Kahneman D (ed.), Heuristics
References and biases: the psychology of intuitive judgment,
AAFC 1998, 'Adapting to change and managing Cambridge University Press, New York, USA, pp.
risk: a profile of Canadian farmer attitudes and 1-18.
behaviour' [online], accessed: 3rd November GRDC 2005, 'Yield Prophet helps weigh the odds'
2003, available at: [online], accessed: 5th December 2005,
http://www.agr.gc.ca/pol/pub/adapt/pdf/adapt_e available at:
.pdf. http://www.grdc.com.au/growers/gc/gc56/riskm
ABS 2006, Impact of the drought on agricultural gt.htm.
production in 2006-07 (Feature Article, released Hall DC, Knight TO, Coble KH, Baquet AE and
6/12/2006), Australian Bureau of Statistics, Patrick GF 2003, 'Analysis of beef producers' risk
Canberra, Australia. management perceptions and desire for further
Adam T, Malcolm B and Williams J 2006, 'A survey risk management education', Review of
of price risk management in the Australian cotton Agricultural Economics, 25: 430-448.
industry', Australasian Agribusiness Review, 14: Hammer GL, Holzworth DP and Stone R 1996, 'The
Paper 4. value of skill in seasonal climate forecasting to
Berg BL 2001, Qualitative research methods for the wheat crop management in a region with high
social sciences, Allyn & Bacon, Boston, USA. climatic variability', Australian Journal of
Black ID 2000, Crop farming performance in the Agricultural Research, 47: 717-737.
Upper Eyre region, SARDI, South Australia, Hardaker JB 2000, Some issues in dealing with risk
Australia. in agriculture, Working Paper Series in
Boehlje MD and Trede LD 1977, 'Risk management Agricultural and Resource Economics, University
in agriculture', Journal of the American Society of of New England, Armidale, NSW, Australia.
Farm Managers and Rural Appraisers, 41: 20-29. Hardaker JB, Huirne RB and Anderson JR 1997,
Clark A and Brinkley T 2001, Risk management: for Coping with risk in agriculture, CAB
climate, agriculture and policy, Bureau of Rural International, Wallingford, UK.
Sciences, Canberra, Australia. Harwood J, Heifner R, Coble K, Perry J and
Cooke P 1997, A publication covering marketing of Somwaru A 1999, Managing risk in farming:
farm products and price risk management, concepts, research and analysis, Agricultural
Kondinin Group, WA, Australia. Economic Report No 774, United States
Department of Agriculture, USA.
Cooper I, Nguyen N and Hancock J 2003,
'Rotations, risk and reward: farming system Hughes BW, Whetherby KG, Kew GA and Lewis DL
choice on the Eyre Peninsula of South Australia', 1990, An assessment of wind erosion on Eyre
Australian Agricultural and Resource Economics Peninsula during 1988/89, Technical Report,
http;\\www.csu.edu.au/faculty/sciagr/rman/afbmnetwork/afbmjournal/index.htm page 29
AFBM Journal volume 4 – numbers 1 & 2 © Copyright Charles Sturt University
Department of Agriculture South Australia, Patrick GF, Wilson PN, Barry PJ, Boggess WG and
Australia. Young DL 1985, 'Risk perceptions and
Jose HD and Valluru RS 1997, 'Insights from the management responses: producer generated
crop insurance Reform Act of 1994', hypotheses for risk modelling', Southern Journal
Agribusiness, 13: 587-598. of Agricultural Economics, 17: 105-116.
Just DR, Wolf S and Zilberman D 2003, 'Principles Potter M 2003, 2004-05 Pre-budget submission,
of risk management service relations in National Farmers' Federation Limited, ACT,
agriculture', Agricultural Systems, 75: 199-213. Australia.
Kay RD and Edwards WM 1999, Farm Ritchie J, Abawi Y, Dutta S, Harris T and Bange M
management, WCB/McGraw-Hill, New York, USA. 2004, 'Risk management strategies using
seasonal climate forecasting in irrigated cotton
Kennedy M 1979, 'Generalizing from single case production: a tale of stochastic dominance',
studies', Evaluation Quarterly, 3: 661-678. Australian Journal of Agricultural and Resource
Knutson RD, Smith EG, Anderson DP and Economics, 48: 65-93.
Richardson JW 1998, 'Southern farmers' income Robertson M, Cawthray S, Birch CJ, Bidstrup R and
risk', Agricultural and Applied Economics, 30: 35- Hammer G 2003, 'Improving the confidence of
46. dryland maize growers in the northern region by
Krueger RA and Casey MA 2000, Focus groups: a developing low-risk production strategies:
practical guide for applied research, SAGE solutions for a better environment', Proceedings
Publications, Inc, Thousand Oaks, California, of the 11th Australian Agronomy Conference,
USA. Geelong, Victoria, Australia.
Marra M, Pannell D and Abadi A 2003, 'The Whetherby KG, Davies WJ and Matheson WE 1983,
economics of risk, uncertainty and learning in the Wind erosion on Eyre Peninsula 1975/79.
adoption of new agricultural technologies: where Technical Paper No.7, Department of Agriculture
are we on the learning curve?' Agricultural South Australia, Australia.
Systems, 75: 215-234. Williams J and Schroder WR 1999, Agricultural
Martin S 1996, 'Risk management strategies in price risk management: the principles of
New Zealand agriculture and horticulture', commodity trading, Oxford University Press,
Review of Marketing and Agricultural Economics, Melbourne, Australia.
64: 31-44. Wilson W and Wagner R 2002, Price risk
Meinke H, Baethgen WE, Carberry PS, Donatellic M, management strategies for grain importers,
Hammer GL, Selvaraju R and Sto¨ ckle CO 2001, Report No.AAE 02004, Department of
'Increasing profits and reducing risks in crop Agribusiness and Applied Economics, North
production using participatory systems Dakota State University, USA.
simulation approaches', Agricultural Systems, Wolff B, Knodel J and Sittitrai W 1993, 'Focus
70: 493-513. group and surveys as complementary research
Meuwissen MP 2001, 'Income risk management in methods: a case example', in Morgan DL (ed.),
agriculture', European Review of Agricultural Successful focus groups: advancing the state of
Economics, 28: 373-375. the art, SAGE Publication, Inc, Newbury Park,
Meuwissen MP, Hardaker JB, Huirne RB and California, USA, pp. 118-135.
Dijkhuizen AA 2001, 'Sharing risks in agriculture;
principles and empirical results', Netherlands
Journal of Agricultural Science, 49: 343-356.
Morgan DL 1998, The focus group guidebook,
SAGE Publications, Inc, Thousand Oaks,
California, USA.
Nguyen N 2002, Farming risks in the Upper Eyre
Peninsula, Master Thesis, The University of
Adelaide, Roseworthy Campus, SA, Australia.
Nguyen N, Wegener M and Russell I 2006a,
'Decision support systems in Australian
agriculture: state of the art and future
development', Proceedings of the 26th
Conference of the International Association of
Agricultural Economists, Gold Coast, Australia.
Nguyen N, Wegener M and Russell I 2006b, 'Risk
management tools for dryland farmers in
southwest Queensland: an action research
approach', Proceedings of the 2006 APEN
International Conference, Victoria, Australia.
Patrick GF and Musser WN 1997, 'Sources of and
responses to risk: factor analysis of large-scale
US cornbelt farmers', in Huirne RB, Hardaker JB
and Dijkhuizen AA (ed.), Risk management
strategies in agriculture: state of the art and
future perspectives, Backhuys Publishers,
Mansholt Institute, Wageningen, The
Netherlands, pp. 45-54.
page 30 http;\\www.csu.edu.au/faculty/sciagr/rman/afbmnetwork/afbmjournal/index.htm