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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: http://agecon.uwyo.edu/RiskMgt/DEFAULT.htm

 

National Ag Risk Education Library: http://www.agrisk.umn.edu/

 

Risk & Resilience in Agriculture: http://agecon.uwyo.edu/RnRinAg/Default.htm

 

Recognizing Risks: http://www.wvu.edu/~agexten/farmman2/riskmang/risk.htm

 

Managing for Today’s Cattle Market and Beyond: http://ag.arizona.edu/arec/wemc/TodaysCattlePub.html

 

Articles

 

Understanding Financial Risk: http://www.ces.ncsu.edu/sampson/pubs/farm_man/UndstandFinRisk.html

 

Dealing with Financial Risk Management on the Farm: http://www.uvm.edu/~uvmext/business/?Page=finriskonfarm.html

 

Financial Trends: How Are Lenders and Interest Rates Changing? http://agecon.uwyo.edu/RnRinAg/RnR Section 4/Rural Financial Trends.pdf

 

Fundamentals of Investment Analysis: http://agecon.uwyo.edu/RnRinAg/RnR Section 4/Fundamentals of Investment Analysis.pdf

 

Farm Financial Statements: http://www.extension.iastate.edu/Publications/FM1824.pdf

 

Financial Guideline Measures: http://www.finbin.umn.edu/webhelp/finbin/financial_guideline_measures.htm

 

Family Living Cost Major Factor Driving Business Size: http://agecon.uwyo.edu/RiskMgt/financialrisk/Family Living Cost Major Factor.pdf

 

Loans for Beginning Farmers and Ranchers: http://www.fsa.usda.gov/pas/publications/facts/html/begloan04.htm

 
 
 
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