COVID-19 has been an unprecedented situation. People throughout all sectors are going through a lot with their businesses, and it has shed new light on the word “risk” and risk management.
When farmers are doing their strategic risk analysis for the year, and they get to the threat portion, a global pandemic wasn’t exactly something that was written down.
As we sit in the thick of it, we’re learning many different things. Dr. Jim Mintert, director of the Center for Commercial Agriculture and professor at the Department of Agricultural Economics at Purdue University, joined RealAg Radio host Shaun Haney to talk about some of the things we’ve learned about risk thus far during the pandemic.
“If you hadn’t been practicing some strategic risk management, you are obviously in more trouble than people that were. Very few people had a perfect plan in place, because this simply is unprecedented,” Mintert says. “I don’t think this changes what we do from a risk management perspective, but I do think it puts an exclamation point on it and points out that we are going to face things we can’t anticipate. Of course, that’s the whole idea behind the black swan event kind of idea, is that things are going to happen that you didn’t dream of happening. The question is, did you have a strategic plan in place that was adaptable and flexible enough to allow you to come out on the other side?”
In agriculture, oftentimes we are known as the eternal optimists. We face tough, tough years, and at the start of a new year, we still can only hope for the best. With that, sometimes comes the attitude of ‘it won’t be that bad, so we’ll see what happens,’ and as Mintert notes, that sometimes prevents us from making some of those strategic decisions that would’ve prevented us from being in the same situation we are in today. (Story continues below)
Check out the full conversation between Dr. Jim Mintert, and RealAgriculture’s Shaun Haney, below:
“Remember that yes, at the end of the day, we are going to continue growing food. We are going to keep producing food. We are going to keep delivering food to consumers. But in the interim short-run, things can get pretty bad, and you need to take that into account when you are making decisions on at least a portion of what you produce. And that’s really the idea behind strategic risk management,” he says.
Unfortunately, sometimes it takes going through something completely unexpected, to change our perspectives on risk. However, when it comes to adhering to risk management, and coming out of this with a different mentality, Mintert says it has different impacts on different age groups, depending on what stage of life you are at.
“I was on a call not too long ago with a producer who was in his late 60s, and obviously was starting out in agriculture in the relatively early stages of his career in the early 1980s, and he pointed out that some of the things he went through then, and in particular some of the things his dad has gone through and experienced going back to the 1930s, had helped him prepare for some of the difficulties we are currently experiencing,” Mintert says. “Whereas folks that really started their career in the so-called good times here of about ten years ago, maybe are a little bit more challenged, because they didn’t go through a period of stress at some point in their career.”
Although the whole situation the world is facing currently can be taken in a very negative way, Minert does add that this can provide room for learning and growth across all sectors.
“Those experiences do have some value, and they prevent you from sticking yourself out there too far on a limb going forward, and will maybe have you being a little more conservative. Because you recognize that you can’t forecast everything with perfect certainty, and you, therefore, need to have some strategic reserves that you can fall back on,” he says.