Australian agriculture: an increasingly risky business

Australian agriculture: an increasingly risky business

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The pursuit of agricultural enterprise in Australia is undoubtedly becoming an increasingly risky business. However, it is also evident that the Australian farm sector has continued to grow despite the absence of significant Government support and a limited range of commercial risk mitigation products. While good farm business practice has been effective in driving a strong and resilient agricultural economy, there is no room for complacency as the sector squares up to some significant new challenges and an accelerating pace of changing risk exposure. The impacts of climate change are exacerbating the complexity of risk management both directly and indirectly throughout supply chains, and institutional risk is emerging as a serious concern.

The pursuit of agricultural enterprise in Australia is undoubtedly becoming an increasingly risky business. However, it is also evident that the Australian farm sector has continued to grow despite the absence of significant Government support and a limited range of commercial risk mitigation products.

While good farm business practice has been effective in driving a strong and resilient agricultural economy, there is no room for complacency as the sector squares up to some significant new challenges and an accelerating pace of changing risk exposure. The impacts of climate change are exacerbating the complexity of risk management both directly and indirectly throughout supply chains, and institutional risk is emerging as a serious concern.

To this end, the research presented here aims to define the extent and nature of risks faced by farm businesses at a sectoral level within Australian agriculture and assess the value offered by different management or mitigation options. Although every farm business is different, this analysis was performed with an awareness that generalisations had to be made based on the (sometimes limited) information available and supported by industry consultation.

As with many aspects of this research, without transparent data across the value chain it is impossible to fully assess the likely consequences of risk or target mitigation efforts. Government and official statistics agencies have a role to play here in supporting and enabling the supply of relevant data.

To expedite better uptake of risk management products, a deep and detailed understanding of how risk appetite interacts with the assessment of the value proposition of risk management products – i.e. via the application of behavioural economics filters – would be of great benefit to the industry.

A cost/benefit analysis on the redirection of Government funding would also be of value, and – if incentivisation of private market risk mitigation products is deemed appropriate – due consideration must be given to both supply and demand stimulus, rather than demand alone.

The research presented here aims to direct risk management efforts where they are most needed and are of most benefit, with the aim to help build risk resilience across agricultural subsectors and into supply chains.

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