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What Is Risk Management and How Can It Secure Your Operation’s Future?

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What Is Risk Management and How Can It Secure Your Operation’s Future?

For many farmers , losing out on profit could be disastrous. In many cases, failing to receive a minimum price for your livestock could mean that you’ll have to sell part of your farm or close your operation entirely. 

There are many challenges that you face every single day as a livestock producer. Today’s market is highly volatile, and prices can drastically change from one day to the next without any prior warning. Market risks can emerge anytime, threatening your operation’s future. 

Fortunately, there are ways to manage the risks that endanger your livelihood. So, let’s look at what risk management is, and what options are available to help you secure your investments. 

What Is Risk Management?

As a livestock producer, you know that many risks can threaten your livestock operation. Extended periods of drought, disease outbreaks, equipment failure, and unexpected market price drops can all leave you feeling helpless. Sometimes, you may only have to sell a few animals or tighten your budget. But, in a worst-case scenario, it could mean the end of your operation. 

Simply put, risk management is the process of identifying and mitigating potential risks that could damage your business. By committing some of your resources to control the impact that potential risks could cause, you can secure your operation against uncertainty, reduce costs, and improve the likelihood of your success in the long term. 

An Example of Managing Risk

A farmer notices that his barn’s wall has a weak spot. If the wall falls, the barn will likely collapse and injure or kill the cows inside. In this case, the farmer can choose to either leave the damaged wall alone or replace the barn. While replacing the barn costs him some of his time and money, the farmer determines that it’s cheaper to replace the barn than face the worst-case scenario.

If he loses his cows, he’ll be unable to pay his bills and will have to sell his operation. But, by replacing the barn, he protects his cows, and increases the likelihood of his operation’s future success. 

This is what risk management is all about.

Create a Safety Net Against Market Risks

A farmer notices that his barn’s wall has a weak spot. If the wall falls, the barn will likely collapse and injure or kill the cows inside. In this case, the farmer can choose to either leave the damaged wall alone or replace the barn. While replacing the barn costs him some of his time and money, the farmer determines that it’s cheaper to replace the barn than face the worst-case scenario.

If he loses his cows, he’ll be unable to pay his bills and will have to sell his operation. But, by replacing the barn, he protects his cows, and increases the likelihood of his operation’s future success. 

This is what risk management is all about.

A farmer notices that his barn’s wall has a weak spot. If the wall falls, the barn will likely collapse and injure or kill the cows inside. In this case, the farmer can choose to either leave the damaged wall alone or replace the barn. While replacing the barn costs him some of his time and money, the farmer determines that it’s cheaper to replace the barn than face the worst-case scenario.

Risk Management Solutions That Meet Your Needs

Unlike other insurance options, Livestock Risk Protection (LRP) and Livestock Gross Margin (LGM) are federally-backed risk management solutions that put you first. Both solutions offer customizable coverage plans that let you tailor a policy to meet your operation’s unique needs without breaking the bank. 

Livestock Risk Protection (LRP)
LRP protects your operation against unexpected national market price drops by setting a price floor. LRP’s price floor guarantees that you’ll never receive less than your covered price for your livestock when you go to market. Even when prices are down, you can rest easier knowing that your bottom line is secure. The ceiling is always wide open, so you’ll still benefit when the market is up. 

Livestock Gross Margin (LGM)
LGM creates a gross margin guarantee, protecting your operation against rise of corn prices, the rise of feeder cattle costs, and the decline of live cattle prices. Your gross margin is the market value of your livestock, minus the costs of feeder cattle and corn. Market prices change constantly, but LGM guarantees that you’ll receive a minimum gross margin when you go to market. 

These risk management solutions are available for producers of all sizes and production stages. Designed by producers, for producers, LRP and LGM provide security against worst-case scenarios. They manage the unexpected, and help you feel confident in your operation’s future. 

It’s impossible to predict what tomorrow’s market may bring. But, you aren’t alone. Begin customizing a policy to protect your operation today with our portal at portal.stockguard.io 

The Smart Way to Safeguard Your Livestock

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