There is popular myth in business that you get paid for producing things that not how it actually works
You don't get paid for for what you made, you get paid for what you manage.
we are going to learn about risk , lets get down to business risk.
Risk is good thing because risk leads to reward when a farmer plants seed in the ground there is no guarantee that seed is going to turn into crop that they can harvest and there no guarantee that there is gonna be a viable market for that crop at harvest but if farmers didn't take that risk everybody would starve don't think of risk is bad thing , risk is just part of doing business your goals is to manage that risk to do that you need to understand five types of agriculture risk
Production Risk
Production risk this is one that most farmers and its tied to one buzzwords we use when we talk about risk and that buzzword is variability , all this means is that your production is gonna to be inconsistent its gonna vary way from year to to years some its higher some years its lower you can have two steer from the exact same bloodline and one will gain weight faster than the other that is variability and that what we mean when we talk about production risk
If animal were guaranteed to gain weight at the speed there be no variability and there would be no risk. the majority of the effort that most famers put into production is aimed at minimizing their production risk and production risk is tied a lot of different things if you've been farming for more than ten minute you know what there are : drought , floods , weeds pest but its more than that have you corn planter just randomly stop dropping seeds and inefficient machine is huge risk
you cant handle risk you are not gonna get the reward in my idea the least well understood is marketing risk
Marketing Risk
Marketing risk - most farmers are going to be selling commodities into global marketplace and change that happen on the other side of the world can be cause the price their product to sky rocket or plummet that is variability and variability means risk .
marketing risk is any thing that create variability in the price you get you for your product or price you pay for your inputs marketing , marketing risk also include access to markets.
Financial Risk
Financial risk these are threat related thing like cash flow and debt cash. Cash flow is a major component of your financial risk , your cash is tied up in a crop or an animal that wont be ready to sell for months down the roads in meantime do you have enough cash on hand to make payment, do you have enough cash to hand to handle your operating expense , do you have cash on hand to take care house hold expenses a lot of very profitable farms still struggle cash flow issue , do you have capital on hand to operate your farm
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