Risk management starts before the storm

Alberta grain growers know risk. A dry spring, a late harvest, volatile input prices, basis swings, trade disruptions, equipment breakdowns and labour shortages can all affect the same production year. The most important risk management question is not only, “What might happen next?” It’s also, “What have I planned for?”

Having a written plan matters. “Risk management is more than getting compensated after a loss. Business Risk Management programs like Crop Insurance and AgriStability are important tools, but they are only part of the picture,” says Mathieu Lipari, Risk Management Lead at Farm Management Canada. “A stronger approach balances recovery tools with planning, prevention and preparedness.” The goal is not to predict every weather event, market drop, or trade dispute; it’s to know your risks and plan your options before a situation hits.

For grain farms, proactive risk management starts with a whole-farm view. Production risks such as weather, pests, disease, moisture issues, and soil health are usually top of mind, but risk also shows up in other aspects of the farm business. Farm Management Canada’s framework groups farm risk into six families: People, Finance, Markets, Strategy, Business Environment, and Production. All of these should be considered as part of your risk management plan, to take the conversation beyond agronomy and insurance.

A practical risk management plan doesn’t need to be complicated. Start with a simple spreadsheet. List the farm’s top risks, rank their likelihood and impact, identify warning signs, and write down the planned response. Is cashflow an issue? How is our debt level? What happens if a key employee or family member is unavailable during seeding or harvest? What happens if your equipment breaks down? How far away is the farm transition and what needs to happen soon to get there? The value is in having the conversations and making the decisions about key risks before they happen.

Let’s take market risk as an example. A written plan should contain key marketing risks and best practices to minimize them. These can include forward contracts, storage, hedging, market diversification, and so-on, as well as BRM programs like AgriStability as a backstop to protect against important market losses. All of these can have a role in your market risk management plan, and none should be used in isolation, if possible. Forward contracts may reduce market risk, but increase production and delivery risk if contracts cannot be fulfilled. Storage may create flexibility, but add quality, cash-flow and interest-rate risk. AgriStability should cover some of your losses, but can’t be the key to your farm’s success on its own. Better decisions come from finding the right combination of risk management practices in advance.

Farm Management Canada’s Risk Management Resource Bundle is a useful starting point for producers who want to move from “we should plan” to “we have a plan.” The bundle follows the same principles as AgriShield, Farm Management Canada’s digital risk assessment and planning platform, but in a simplified, free, offline format. It includes a Risk Management Starter Guide, a Risk Assessment and Planning Spreadsheet, and Action Plan template and sample. In practical terms, it helps growers assess risk tolerance, rank risks by likelihood, impact and preparedness, and turn priorities into best practices with an action plan containing roles and timelines.

Advisory support can also help strengthen the plan, especially when they are used before the crisis happens. Accountants, lenders, agronomists, insurance agents, grain buyers, lawyers, peers and your farm team each see the business through a different lens. Bringing them into the risk assessment and planning conversations early helps to build a plan that will avoid surprises and find workable solutions.

“The payoff of a good risk management plan is not only financial,” says Lipari. Farm Management Canada’s research found that 88 per cent of farmers who follow a written plan reported greater peace of mind. This season, set aside time with the farm team to start or update a simple risk management plan. Review it in a few months, see how it went and what has changed, and make improvements. The objective is not to have a binder sitting on a shelf – it’s to have an answer to a practical question, “What do we need to put in place now, to be successful when conditions change later?”

Learn more about Farm Management Canada's Risk Management Programs here.