Managing a New Kind of Risk

Author: Danny Morris, Ext Area Specialist - Farm Management Comments Off on Managing a New Kind of Risk

In agriculture, we are constantly faced with risk. Farmers are faced with the risk of adverse weather conditions, volatile commodity markets, and many other production risks. As an Extension Farm Management Specialist, I try to communicate to producers the options they have to reduce their overall risk exposure.

I like to narrow down the areas of risk that farmers must manage to two main areas: financial risk and production risk.

Farmers can do a few things to reduce their overall financial risk. First, producers can be active managers and prepare a budget for the upcoming year. Budgeting does not eliminate risk, but it does provide the framework of determining your cost of production. This will enable a producer to have a better handle on which crop could be the most profitable for their operation.

Other methods of reducing financial risk include having a marketing plan and closely evaluating large capital outlays. Farmers can use multiple types of contracts to reduce their price risk by locking in prices for a part of their production. Farmers can take their marketing plan a step further by using crop insurance as part of their marketing plan. In fact, certain types of crop insurance can even provide revenue protection for producers. Other things that can help reduce price risk can include grain storage and options. All of these risk reducing tools require planning, but what part of farming doesn’t require planning?

Production risk is very different than financial risk. There are production risks that we just cannot control such as weather. However, growers have several risk reducing tools at their fingertips. We have hybrids that are drought tolerant and have traits that make them resistant to insects and diseases. Producers can use irrigation to reduce the risk of losing a crop due to dry weather. Precision agriculture has enabled farmers to identify problematic areas in a field so that they can correct them. We have pesticides that can control numerous insects and weeds. I know that we have problematic weeds such as Palmer Amaranth that are a thorn in our side. Thankfully, new chemical and seed technology is being introduced to help address this problem. This is where a new kind of risk has started to appear: your neighboring farmer.

In 2017, farmers will be able to spray dicamba on soybeans and cotton that are tolerant to the herbicide. The issue with dicamba is the potential drift that can occur if the chemical is not applied properly. The low volatility dicamba has a label that has been carefully prepared to provide farmers with instructions on how to properly apply the chemical. On top of that, many producers either have been through or will go through a herbicide stewardship training on how to correctly use the low volatility dicamba. However, there are risks associated with using this technology if it is not used properly.

The new technology also has costs associated with it. For example, a soybean producer will pay approximately $10 more per acre for seed that is dicamba tolerant. The low volatility dicamba will cost approximately $10-$12 per acre for each application of the chemical. There are other costs such as having to rinse sprayer tanks. It is recommended that farmers use between 500 to 1,000 gallons to rinse their sprayers to eliminate the chance that any dicamba is still in the sprayer. There is also the added inconvenience of waiting for the right wind speed, using special sprayer tips, making sure the temperature is within a certain range, not being able to tank mix, and documenting everything you do. It is these extra steps that may cause some producers to cut corners to save time and money. This is how the stewardship of these new herbicides could become compromised and create additional risk for Tennessee farmers.

In reality, the true risk with this new technology is farmers’ attitudes toward the technology and how they use it. Over the past few weeks, UT Extension has held various crop production meetings and three perspectives towards the dicamba tolerant cotton and soybean technology have prevailed at each meeting. First, some farmers intend to use the new dicamba tolerant hybrids along with spraying the low volatility dicamba to try to better control pigweeds. Second, some producers intend to plant dicamba tolerant hybrids as a defense mechanism to ensure that their crop is not damaged by any dicamba drift from neighboring farmers. Finally, some producers feel that the dicamba tolerant seed and low volatility dicamba technology has been forced upon them. These growers feel like they have no say in the matter and refuse to use the technology in their operation. As a result, the attitude of some is that they will sue anyone that damages their crop with dicamba drift. In 2016, there were several headlines of producers having conflicts with neighboring producers over the issue of dicamba drift. The goal of the agricultural community should be to prevent these type of occurrences from happening again in 2017.

In 2017, farmers will need to communicate with their neighboring producers of what they intend to plant. In addition to that, producers will need to adhere to the label of the low volatile dicamba so that the technology will continue to be available and to reduce the likelihood of damaging any neighboring crops. A simple phone call to a neighboring grower could help you reduce your production risk. By knowing what others’ planting intentions are, you can better manage what seed varieties you plant in fields that could be exposed to dicamba drift. Farmers that are proactive in finding out if their crops are near fields with dicamba tolerant hybrids are indeed managing their production risk. Not only are farmers reducing their production risk, they are likely salvaging a relationship with their neighboring farmers. Even though neighboring farmers are your competition, oftentimes they are friends and can even be family. If a simple phone call can help you protect your crops, then why would you not communicate your planting intentions with neighboring farmers? By doing so, you are taking one less risk off of the table.

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