Research Reports
A Study on Risk Management Strategies for Specialized Farm Households
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AuthorHwang, Euisik
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Publication Date2008.11.01
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Original
This study aims to suggest risk management strategies for specialized farms by analyzing the risks confronting them. We define agricultural risk and classify the causes and possibilities of risk occurrence to propose the strategies. It is analyzed that "production risk" is closely related with climate change and animal disease, "price risk" with sudden increases in the global market price of raw materials such as oil and crops, "financial risk" with debt, and "human risk" related to the aging society. Therefore, the risk management for specialized farms has to be approached based on a comprehensive business management viewpoint, rather than targeting specific risk factors only.
According to this study's research results on farm income fluctuation and on how specialized farms manage risks, specialized farms are dependent on agricultural income and thus more susceptible to uncertainties of agriculture such as market opening. Therefore, it is essential that specialized farms strive to maintain a stable farm income and decrease debts, rather than make excessive investments to enlarge farm scale. Although there are already many policies funded by the government, specialized farms need to reinforce their risk management on their own.
The strategies offered in this study are as follows: first, risk management through producers' association to avoid disadvantages of small farms; second, transfer of crop and accident insurance into revenue insurance and then further into income stabilization policy; third, introduction of income tax equalization system; fourth, preparation of a legal apparatus to protect the farmers as they are the weak party to a contract as opposed to processors, packers and distributors.
Researchers: Hwang Eui-Sik, Lee Young-Ho
E-mail address: eshwang@krei.re.kr
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