Risk Management in Agriculture

Risk Management in Agriculture

April 7, 2017

Blogs and Articles

Agriculture & Food Processing

In case of Agriculture, ‘Risk’ is the uncertainty that matters, and may involve the probability of losing money, possible harm to human health (due to continuous chemical sprays), repercussions that affect the resources (irrigation, credit, insurance), and other types of events which effects farmers welfare. Risk is inherent to Agriculture, hence Risk Mitigation should become an inherent part of the same.

‘Risk Management’ involves choosing among options/choices to reduce the risk effects. It generally requires the evaluation of trade-offs between changes in risk, expected returns, farmer welfare and other variables. It also involves the farmers understanding ‘Risk’ as a starting point which will help him make good choices in a situation where adversity and losses are possibilities. In short, Risk Management involves choosing among alternatives that have uncertain outcomes and differential outcomes and returns.

There are various tools which can help Farmers can undertake ‘Risk Management’. Following are the select few ways in which farmers can undertake ‘Risk Management’:

  • Crop/Weather Insurance: This is an extremely sophisticated and easily available tool to manage risk in agriculture. Crop/Weather Insurance can provide farmers a fall back option, if there is a reduction in their crop yield.
  • Flexible Working Management: Crop failures due to factors beyond farmers control can create a havoc in the lives of farmers, if there is no credit available to him. If the farmers have flexible credit facility available, it will help the farmers to manage the crop risk to a large extent.
  • Mobility and Information Management: Mobiles are a great means to Risk Management. Information services like weather forecasting, crop advisory and soil, animal & water diagnosis, combined with the usage of IoT (Internet of Things) will help farmers generate a significant amount of data about his operations, and will go a long way to manage farm risks.
  • AgTech Adoption: Farm mechanisation, substitution of labour technologies, alternative technologies (IPM) to traditional practices which are destroying our resources through abusive usage of chemicals, will the farmers to reduce the cost of doing farming, which in turn will act as a natural ways to manage risk.
  • Post-Harvest Tech: Availability of solar powered Micro Cold Storages, food processing facilities at farms are important ways to Risk Management. In addition, usage of technologies to increase the shelf life of agriculture produce (reducing the logistic costs as well as post-harvest shrinkage) acts an important means of Risk Management.

Overall, the Indian Agriculture needs to embrace the usage of new technologies in the areas of yield improvement, information management, generating information where the information is non-existent through usage of IoT, Crop & Weather insurance, alternative means of crop protection (to improve the quality of critical resources – soil, water and environment) will go a long way towards sustainable and profitable farming.

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Mahadev Margi

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