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Wyo Ag Risk - Financial Risk

Livestock Financial Risk

Financial risk covers those risks that threaten the financial health of the farm business and has three basic components: 1) the cost and availability of debt capital; 2) the ability to meet cash flow needs in a timely manner; and, 3) the ability to maintain and grow equity. Cash flows are especially important because of the variety of ongoing farm obligations, such as cash input costs, cash lease payments, tax payments, debt repayment, and family living expenses.  (After National Crop Insurance Services’ Crop Insurance and Risk Management Primer, Risk Overview, page 35.)

The growing size and complexity of today’s typical livestock operations are driving increasingly elaborate financial structures.  As operators devise new and creative ways to access and utilize capital, they expose themselves to greater financial risks.  Managing the financial risks associated with livestock production can, at times, be a daunting task without the right tools and skills.  Fortunately, today’s producers have at their disposal more and more tools to help them manage their financial risks.  These resources can help producers manage and reduce their exposure to risks associated with liquidity, solvency, repayment capacity, efficiency, and profitability.  


Two articles are presented on the topic of Livestock Financial Risk:

  1. From the National Crop Insurance Services’ Crop Insurance and Risk Management Primer, we provide an article by Dr. Laurence M. Crane entitled Financial Risk. (4 pages)
  2. From Colorado State University's Rod Sharp, we provide "Risk and Resilience in Agriculture - Financial Management and Analysis." (3 pages)

These articles were selected for their relevance, ease of understanding, and completeness; however, they do not provide an exhaustive discussion of livestock financial risk.  Readers desiring additional information about livestock financial risk are encouraged to explore the reference links provided below.

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Additional References


Library Sources

Western Risk Management Library:


National Ag Risk Education Library:


Risk & Resilience in Agriculture:


Recognizing Risks:


Managing for Today’s Cattle Market and Beyond:




Understanding Financial Risk:


Dealing with Financial Risk Management on the Farm:


Financial Trends: How Are Lenders and Interest Rates Changing? Section 4/Rural Financial Trends.pdf


Fundamentals of Investment Analysis: Section 4/Fundamentals of Investment Analysis.pdf


Farm Financial Statements:


Financial Guideline Measures:


Family Living Cost Major Factor Driving Business Size: Living Cost Major Factor.pdf


Loans for Beginning Farmers and Ranchers:

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