Risk management is a well-used phrase when discussing farming but, like many other familiar phrases, it sometimes gets used without considering what it really means for individual businesses.

The AHDB Monitor Farm at Huntingdon attempted to rectify this with a special meeting to untangle what risk management means for arable farmers and give them the tools to do it on their farms.

“I think of a risk as a threat or opportunity that can affect the overall profitability of the farm,” explained Tim Isaac, AHDB Regional Manager. “Extreme weather or a slump in the grain price are the two that most readily spring to mind, but things like staff retention or relationships between family members need just as much planning.”

“Looking at the positive side, it’s about getting a farm ready to take advantage of opportunities that arise, like more land or new markets,” he continued. “You need to be in a position to do this quickly because chances are that you’re not the only one interested.”

Identifying risks

The few examples given by Tim are really just the tip of the iceberg. So, what can a farm do to avoid becoming the Titanic?

First of all, try to get an idea of all the potential risks facing the farm, then consider three things about each one:
•    How likely is it to happen?
•    When could it happen?
•    How big an impact could it have?
The answers to these questions will give a farmer an idea about which risks to deal with as a priority and which ones just to keep an eye on.

This process can appear quite daunting because of the range of challenges faced by farms. For example, one day might see someone juggling machinery repairs with fine legal points in a tenancy contract and an outbreak of yellow rust. But thinking about these issues before they become urgent is crucial because farmers will already have taken steps to reduce the impact and have an idea about how to resolve them.

The challenge of low grain prices

A risk of low grain prices is one facing all arable farmers – ultimately, the global price is out of farmers’ hands so the risk has to be managed in two ways: cutting the cost of production and using forward selling and contracts to get a better price.

Lee Wakefield, member of the Monitor Farm benchmarking group, has recognised this challenge and is doing both of these.

“At present, we don’t seem to have a big growth in market prices, but the cost of production is going up so you have to scrutinise it closely. Sometimes, two hours in the office looking at the business in detail is worth more than a week in the field,” says Lee.

Identifying the outlet for the crop before you even put it in the ground is important for Lee. “Unless there’s a market better than the cost you produce at, there is little point in growing it.”

Lee has used different methods to manage this risk. For example, he has used contracts that lock in the value of the milling premium. This means Lee and the buyer are sharing the risk: Lee is protected from the premium getting too small, the buyer against it getting too large.

If you are going to sell ahead, knowing your costs is essential, according to Lee: “You watch the markets closely and sell when it is right for your business,” he says. Lee chooses to spread sales through the season which balances the risk of a big drop or rise in the market. “The main thing is to have a plan and stick to it – that way you won’t be wrong – the worst thing you can do is to chop and change your strategy midseason.”

Thinking about opportunities

As Tim mentioned before, missing out on opportunities can affect the bottom line as much as any shocks or crises. Monitor Farmer Russ McKenzie is keenly aware of this and is always prepared to consider new farming techniques.

“I like trying new things, such as the grazing of cover crops that we saw on the farm walk today, but you have to be responsible and develop step-by-step,” says Russ. “Just because it works somewhere else, doesn’t mean that it will be a success on your farm. Until you try it for yourself, you won’t know how it will work out.”

For instance, last year, Russ experimented with a low disturbance shallow subsoiler leg for oilseed rape establishment. The idea was that it would improve black-grass control, but establishment was poorer which reduced any benefits. But this didn’t faze Russ as he is a firm believer in trial and error.

This year, he is looking into using cover crops to improve soil structure and weed control. Improving soil is a long-term approach to manage the risk from bad weather because better-structured soils drain more effectively.

The black-grass conundrum

Looking at weed control from cover crops, the Huntingdon meeting heard a detailed presentation from John Cussans of NIAB TAG about cover crops and other cultural techniques to deal with black-grass. Mr Cussans was keen to emphasise that dealing with black-grass is about balancing probabilities – no technique or programme is guaranteed to deliver every year because weather conditions can work against it.

For example, later sowing is widely used, but farmers have to be aware it could mean that a crop isn’t sown at all if October is very wet so they need a back up plan in mind. Likewise, switching to a spring crop is another popular cultural control method, but in many spring crops the chemistry available is much more limited for any weed problems that do arise.

Thinking specifically about cover crops, Mr Cussans pointed out that, from current research, the benefits for black-grass control from a cover crop followed by a spring crop are no different to just sowing a spring crop. However, that’s not to say that cover crops aren’t beneficial, they just aren’t an instant solution to black-grass.

Black-grass, like risk management in general, means farmers have to make compromises and balance probabilities. Having clear objectives for different areas of the business and a plan of how to get there is essential – once this is in place, farmers are in a better place to ride out any storms.