Wednesday, January 21, 2009

Diversify or Die

Wouldn’t it be great if some one would come up with the ultimate all risk insurance package, one that protected the farmer from every peril known to agriculture. A parcel so comprehensive that it would protect each sodbuster or stockman against early frost, drought, hail, floods, closed borders, collapsed commodity prices and rising fuel costs. As icing on the cake, imagine if this definitive bundle of indemnity required no monthly payments or annual premiums. As surrealistic as this scenario sounds, it may come as a surprise to many, that such a policy is available to each and every person involved in agriculture and that coverage is called farm diversification.

While such a concept may come as a shock, the idea of risk spreading had its foundation established generations ago when first the pioneers began to settled this mighty land. In the days before stabilization payments, GRIP and NISA, farmers were able to make it from year to year by raising and selling a variety of commercial goods. Because individuals back then did not rely on a single agricultural product, it was virtually impossible to face a “perfect storm” of high feed prices that hog producers are facing today, that cattle producers lived through following the BSE, and low commodity that grain growers endured for a decade before that. While each of the aforementioned crisis’ appear to be unique, over the long run, these periodic “disasters” are statistically predictable and therefore the notion still exists that multiple commodity farms are best suited to for agricultural businesses to survive in the long run. Below are 5 tips on diversifying your farm.

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