Farmers’ risk perception, risk aversion and strategies to cope with production risk: an empirical study from Poland

Abstract

Agriculture is an activity burdened with multiple risk factors, some of which are related to the biological nature of production. Climate change, liberalisation of international agricultural trade and changes in the agricultural support system mean that the importance of risk in agriculture will increase. This means that increasing attention will be given to risk management at the farm level, although implementation of the appropriate risk management strategy is connected to farmers' perception of, and aversion to, risk. This study, which integrates these three aspects of risk in agriculture, is based on data collected from almost 600 participant farms from the Polish FADN system. It was shown that drought is perceived by farmers as the main factor of risk in production in Poland. Polish farmers are rather risk averse, but a little more in terms of their personal health and less in the case of the farm. The analysis showed that the following factors increased the level of risk aversion of Polish farmers: debt ratio, losses in production in previous years, soil quality and concentration on fi nancial independence as a hierarchy of priorities. The most important risk-coping strategy was crop insurance. Knowledge of farmers' perception of risk, risk aversion and preferred risk management strategies is essential for creating policy instruments to support agricultural risk management, and for the development of training programmes tailored to the needs of farmers.

Explaining farmers’ reluctance to adopt recommendations for sustainable ecosystem management

“…This is in line with the literature on agricultural risk management, which asserts that subsistence farmers' decisions in the face of risk are often based Table 3 Scenarios proposed by the models for water conservation on careful evaluation of different alternatives with the end goal of ensuring food security and maximizing profits while minimizing risk (Miller et al 2004;Greiner et al 2008;Sulewski and Kloczko-Gajewska 2014). This line of argument is also supported by ecosystem literature which recognizes that farmers' risk management behaviors have direct implication on ecological performances and that individuals tend to prefer benefits to be provided sooner than later and to postpone costs to the future as opposed to incurring them in the present (Fisher et al 2011;Boelee et al 2013;Mouysset et al 2013).…”

Producer Price Risk in Bulgarian Agriculture

“…α -level of LPM One of the possible criteria for selection of the LPM power (α) is the level of the investor's tolerance to risk. A number of studies [6], [7] provide empirical evidence that farmers are generally risk-averse. The specialized literature [8] recommends risk-averse investors to raise the deviation from the benchmark )K − L* to the second power (α=2) when calculating this indicator.…”

Risk factors in the agriculture sector

“…Firstly, as a business with a typical price and demand fluctuations (Uematsu and Mishra 2011;Sulewski and Kloczko-Gajewska 2014), emerging from the trade liberalization and the changes of the Common Agricultural Policy (Lien et al 2003;Bureau et al 2005;Flaten et al 2005;Ahn et al 2009;Park 2013;Lee and Lim 2015), but also another risks characteristic for this sector as the climate, weather, infections, which have the tendency to rise (Alcamo et al 2007;Kundzewicz and Kozyra 2011;Olesen et al 2011;Kemény et al 2013;Legg and Blandford 2015;Kan et al 2015;Prokopy et al 2015).…”

“…Most often it is about the diversification, insurance, debt management, integration (Akcaoz and Ozkan 2005;Lagerkvist 2005;Sulewski and Kloczko-Gajewska 2014). The flexibility and caution, cost reduction, division of labour and guidance, membership in the corporate respectively farmers union, and prevention were also mentioned (Hayran and Gul 2015).…”