Risk Management Options for Montana Ranchers
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2009-05
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Agricultural production is a financially risky business. On Montana ranches, forage losses from natural hazards (lack of moisture, severe drought, etc.) are frequent. Livestock losses also occur because of adverse winter weather, summer heat, animal disease and predation. Ranches also face substantial price risks, both in the resource markets where they purchase their inputs and the commodity markets where they sell their livestock and crops. Energy and feed prices often vary substantially from one month to the next. Livestock prices can also be volatile. Moreover, the link between ranch level production losses and commodity prices is weak. At the market level, when production is relatively low prices tend to be relatively high, but an individual agricultural producer may experience low levels of production because of locally adverse production conditions when commodity prices are also low.
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Policy Paper 29: Risk Management Options for Montana Ranchers, James B. Johnson & Vincent H. Smith, May 2009