Risk Management Matters

Friday, August 22, 2025

‘In the world of farming, the only certainty is uncertainty.’

By Mary Loggan

Farming has always been a profession marked by uncertainty, but today’s landscape presents challenges that can threaten the financial stability of even the most seasoned producers.

From unpredictable weather and disease outbreaks to the complexities of international trade and tariffs, farmers face a multifaceted array of risks that require thoughtful management.

Better Farming recently connected with Michael Menzi, senior district director at FCC, to discuss how these factors uniquely impact farming operations and offer practical insights into the programs, technologies, and strategies farmers can use to protect their livelihoods and plan for the future.

Challenges

Farmers operate in an environment defined by volatility and unpredictability, Menzi says.

He points to reasons why farmers are susceptible to financial stress and risk: Tariffs, weather, and disease.

“Whether they are producing crops or livestock, these factors can have a large impact on their financial stability.”

He says these factors combine to create a high-risk environment that can rapidly erode profitability and threaten the long-term viability of farm businesses.

The weather is perhaps the most uncontrollable factor. Menzi explains, “Weather can severely impact production levels due to frost, drought, flooding, et cetera, which are out of the producer’s control.

“Certain weather conditions can also lead to increased incidents of disease in crops. The unpredictability of weather events such as late frosts, prolonged droughts, or excessive rain- fall can devastate crop yields and quality. Moreover, adverse weather conditions often exacerbate the spread of diseases in crops, further reducing output and increasing costs.”

While technologies exist to help mitigate some weather and disease risks, Menzi notes that “depending on the financial conditions of the farmer, cost-benefit comparisons could limit the use of some of those technologies.

“For many farmers, especially those with limited capital, the up-front investment required to adopt advanced risk-reducing technologies can be prohibitive, forcing them to accept higher levels of exposure to these risks.”

Livestock producers face similar vulnerabilities. “Weather can also impact cost and quality of feed supply, which has a direct impact on profitability. Disease, whether in crops or livestock within the herd, is also a big variable that can have a devastating impact on profitability.”

He explains feed costs can fluctuate dramatically with changing weather patterns, affecting both availability and nutritional value. Disease outbreaks within herds or flocks can cause severe losses, sometimes wiping out entire groups of animals.

Technologies such as vaccines, filtration systems, and biosecurity measures can help reduce these risks, but again, “the initial investments involved in obtaining and deploying these technologies are believed by many farmers to also have an impact on potential profitability.”

This creates a difficult balancing act between managing risk and maintaining financial viability, he notes.

Tariffs and trade restrictions add another layer of complexity. The agriculture sector’s heavy reliance on exports means that “tariffs and trade restrictions will continue to impact farm operations, and the ramifications could directly hinder profits, if alternative buyers cannot be found,” he says.

“Trade disputes and changing international policies can abruptly alter market access and pricing, leaving farmers vulnerable to sudden income declines.

“The uncertainty surrounding global trade relations requires farmers to remain agile and prepared for shifting market conditions.”

Steps and programs

Given these challenges, what practical steps can farmers take to protect themselves?

Menzi emphasizes that “what’s key is to ensure farmers remain aware of the different programs and technologies available and their evolution over time. Staying informed and proactive is essential to managing risk effectively.”

Menzi advises considering:

Risk management programs: Farmers can utilize a variety of government-supported programs and financial tools to mitigate risk.

This includes:

• Hedging strategies for pricing;
• Insurance support, such as crop or business interruption, to protect revenue during a crisis.

He says, “Ontario offers risk management programs designed to offset price fluctuations in the market.

“Federally, programs like AgriInvest and AgriStability provide financial support to help offset both small and large income declines. These programs act as safety nets, helping farmers weather periods of low prices or poor yields without jeopardizing their entire operation.”

Technological adoption: The rapid advancement of agricultural technology offers new opportunities to manage risk.

Menzi points out that “there are all kinds of ag/food technologies out there seeking to harmonize process, simplify decision-making and better manage risk.

“Technologies such as precision agriculture tools, sensors, data analytics, and automated systems can improve efficiency, reduce input costs, and provide early warnings of disease or weather threats.”

However, Menzi cautions that “cost-benefit ratios, sensors, instrumentation and measures of improvement are ever changing, so farmers must continuously evaluate whether new technologies align with their financial situation and risk profile.”

Individualized risk assessment: Menzi stresses that “there is no ‘one-size-fits-all’ approach.” Each farm operation faces a unique set of risks based on its size, location, production type, and financial condition.

“We recommend that each owner have their own assessment of the risks their respective operations face. Once they know their exposed risks, they can better determine which of those risks require mitigation plans.”

He explains that understanding how a farm would cope with large increases in expenses or decreases in income is “highly valuable to decision-making.”

This personalized approach enables farmers to prioritize their risk management efforts and allocate resources more effectively.

Looking ahead

According to Menzi, planning for the future requires both vigilance and collaboration.

He points out that the landscape of risk management is always evolving, with new programs, technologies, and strategies emerging regularly.

Farmers who stay engaged with industry developments and maintain open lines of communication with experts will be better positioned to adapt and thrive.

“My advice would be to remain closely connected with industry peers and financial professionals.

“These individuals and/or organizations are equipped to help owners identify risks and keep them well informed of the various risk mitigating actions, and how those actions are most likely to affect their respective operations.”

He advises that building a strong network of trusted advisors and peers is key, and by understanding the unique challenges they face, producers can take deliberate steps to manage risk and safeguard their operations. BF

SIDEBAR:

Income Support Tools

AgriInvest is a self-managed savings account that helps farmers manage small income declines and invest in risk management or market opportunities.

• Annual Deposits: Farmers can deposit up to 100 per cent of their Allowable Net Sales (ANS) each year, with the government matching one per cent of ANS (up to $10,000 annually).
• Account Structure: The account is split into two funds:
• Fund 1: Farmer’s own deposits (not taxable when withdrawn).
• Fund 2: Government contributions and interest (taxable when withdrawn).
• Flexibility: Funds can be withdrawn at any time, providing a financial cushion for unexpected expenses or investments.

AgriStability protects farmers against large income declines caused by production losses, increased costs, or market disruptions.

• Income Protection: If a farmer’s margin falls below 70 per cent of their recent average (reference margin), AgriStability provides compensation.
• Eligibility: Open to most farm operations, with benefits triggered by significant income drops due to factors like poor yields or market downturns. A completed production cycle is required, with exceptions possible in disaster situations.
• Faster Payments: Provinces may offer interim payments of up to 75 per cent of the estimated benefit and targeted advance payments in case of sector-specific disasters. BF