Dairy farmers urged to think about managing risk
o 82 per cent of farmers are less likely to undertake risk management strategies in the future.
Dairy farmers are being called on to think carefully about plans to mitigate future risk to their businesses, following new research from Barclays.
Results were surprising that more than three in four dairy farmers (82 per cent) surveyed for the study said that they are reducing the risk management strategies despite the turbulent markets of the last few years.
The research released today to mark the start of the National Dairy Event & Livestock show also reveals the steps milk producers are currently undertaking to prevent risk. Two thirds (69 per cent) are forward buying inputs, 49 per cent are arranging fixed rates for loans, 13 per cent had fixed the exchange rate for the single payment and finally more than one in 10 (12 per cent) had signed up to fixed price selling contracts.
Commenting on these results, Euryn Jones, National Agricultural Specialist at Barclays said: "Whilst it is encouraging to see a good number of dairy farmers adopting strategies to manage risks in their business now, it’s worrying that so many are planning on doing less in the future".
Of the farmers interviewed, the biggest perceived threats for dairy over the next five years are low prices (54 per cent), price volatility (31 per cent) and rising commodity prices (39 per cent).
Euryn Jones continues: "Farming businesses are constantly working in a volatile environment, both physically and economically. Such volatility inevitably leads to risks for the business, and farmers need to consider how to mitigate such risks, wherever practical. In recent years farmers have experienced significant economic and weather-related unpredictability, but such uncertainty appears not to have encouraged increased interest in adopting risk management strategies.
When lending to a farming business, the farmer’s approach to risk management is one of the considerations that a bank will take into account when assessing the proposition".
