Strategic risks threaten a farm’s ability to meet its long-term objectives and often cause a farm to rethink its long-run strategy.
That was the assessment of Purdue University researchers Margaret Lippsmeyer, Michael Langemeier, James Mintert and Nathan Thompson, after analysis of farmer surveys of their agility, or ability to adapt to changes in the economy, risk and price. Their article on the study examined the relationship between agility and farm characteristics like farm growth, producer sentiment, demographics, identification of major threats, management practices and resilience to strategic risk.
Strategic risk is the risk of being out of position when responding to shifts in the political and social environment, a growing or contracting macroeconomy, or a changing input and output price landscape, a Purdue University release said.
AGILITY
Agility is related to a farm’s ability to spot and exploit changes in markets in a timely fashion, the release said. Agility may be related to improving current farm processes, the ability to shift resources among enterprises and/or the ability to exploit opportunities in a timely fashion in response to market changes.
The researchers said, asking the following question may be helpful. “How easy is it for our farm to switch our input mix or our enterprise mix in response to changes in relative input or output prices or new technologies?”
In general, agility measures a farm’s consistent ability to identify and capture business opportunities more quickly than rivals, the release said.
Purdue’s strategic risk survey included three questions pertaining to agility. 1) Did a respondent’s farm had established goals, objectives and core values? 2) Did a respondent look for opportunities that new enterprises may provide? 3) Did a respondent regularly assess their advantages and disadvantages compared to other farms?
On average, 90% of the respondents indicated they had established goals, objectives and core values, the release said. About 83% of respondents indicated they looked for new opportunities, and 71% indicated they regularly assessed their relative advantages and disadvantages.
RESULTS
All three of the agility measures correlated with farm growth, indicating the more agile farmers had higher farm growth expectations, the release said. There also was a “positive and significant correlation between producer sentiment and absorption capacity.”
Responses were not correlated with farm size or education achievement, but there was “a significant and negative correlation” for each question and operator age, indicating that younger operators were more likely to answer agility questions affirmatively, the report said.
There also were correlations that showed those farmers that were more concerned about financial risk were more likely to assess their relative advantages and disadvantages, the researchers said.