Risk assessment in agriculture: problems and perspectives

Abstract

Agriculture is an economic sector facing large risk, mainly from natural factors and despite of relatively low price responsiveness to supply and demand causes output volatility in general. It is a risky business, and risk assessment and management tools have become increasingly important in recent years. Risk assessment and management is a complex process, since the risk arises from different sources. Due to different risk sources, it is important to consider such factors: seasonality, agricultural products are perishable; variability in prices of raw materials and a long production cycle; climate changes; agriculture is impacted by environmental protection restrictions; fluctuations in agricultural produce demand, supply and prices; high transportation prices lead to an increase in product prices, which entails higher economic risk; climatic conditions; animals and plant welfare, and etc. Typically, scientific literature analyses only one type of risk. As a result of the research, financial, business, credit, and currency risk models were created and adapted to the various countries conditions (mostly in banking sector). Meanwhile risk in agriculture should be analysed as holistic phenomenon, that is affected by different source of risks (economic, political, financial, human, production). It should be noted, that there is a lack of research related to agricultural activities and their specific features. Risk assessment in agriculture is relevant on both the theoretical and practical level, so it is important to identify main risk factors in agriculture, to investigate their evaluation models/methods, to distinguish their advantages and disadvantages for farmers.