Insights

Wrapping up the PRM Series

by | Feb 25, 2016

Category: Markets

Key Insight

At current prices, investing back into the farm just isn’t that attractive.  How can a farmer sell their crop today to pay bills and debts, yet ensure that if the price goes up in a few months, they will not have lost their opportunity?

What have we learned about Price Risk Management from this interview series?

We’ve had five very different discussions along the way – perspectives from the point of view of the cooperatives, from the exporters, from estates and from a leading broker of options and futures contracts. It was my hope that by getting diverse opinions on PRM, the most common and shared viewpoints would resonate throughout these.

I came into this process very much a PRM novice.  I have a great understanding of the risks that farmers face in the field – the whims of a changing climate, El Niño, diseases … but on top of all of that, they face risks in the market, which I came to appreciate. From a farmers’ perspective, it is extremely hard to invest in mitigating risks on the production side, in new technologies to make your farm more productive, more efficient, with less impact on the environment if you can’t protect yourself on price.

While I believed that farmers needed to find ways to insure they got the best price they could get, could they minimize their risk without turning into speculators, with their eyes (and focus) always glued on the price ticker? I learned a lot along the way.