Farm risks and uncertainties

Abstract

Owing to the variable economic and biophysical environment, agricultural activities are subjected to variety of risks and uncertainties. Our contemporary review of the previous literature distinguished two major types of risk in agriculture. First, business risk which include production, market, institutional and personal risks. Second, financial risks resulting from different methods of financing the farm business. The relative importance of these risk sources may depend on the geographical location, government policies and legislations, the presence of formal (state owned) and/or traditional risk coping tools, type of agricultural product etc. There is a wide array of risk management tools available to the farmers to manage their risks at farm level. The adoption of these risk management strategies are heavily influenced by farmers’ risk perceptions their attitude towards risk, farm and farm household characteristics and farmers’ access to publically provided services including agricultural credit and information. An insubstantial proportion of literature also revealed farmers’ behavior of simultaneous adoption of multiple risk coping tools in managing their farm risks and therefore suggesting future studies to investigate farmers’ decisions making process in context of simultaneous adoption of the available risk coping tools.