Assessing Farm Resilience to Strategic Risk

Strategic risks are characterized by exogenous market shocks which create a misalignment between a business’s current strategy, business resources, and capabilities. These risks come from a variety of sources including changes in government policies, unprecedented shifts in weather patterns, labor shortages, evolving consumer preferences, and geopolitical conflicts. Each source of risk presents unique threats to farming operations yet are similar in that they lack off-the-shelf risk management tools. Rather, producers must build operational resilience to accommodate for these risks, where resilience encompasses a farm’s ability to weather through, adapt to and recover from strategic risks.

This study uses survey data from 403 commercial producers within the United States to assess farm resilience to strategic risks. Prior to this research, there have been no estimates of resilience for U.S. agricultural producers. Our results are critical in bridging this gap by providing an assessment of resilience to strategic risk for commercial farms within the United States. Correlations, regression analysis, and cluster analysis are used to analyze how farm level characteristics relate to a producer’s resilience to strategic risk. Results suggest that resilience is positively related to management practices, producer sentiment, farm growth expectations, risk preference, and adoption of precision agriculture technologies.

Conclusions of this study detail an ongoing need for improvements to farm resilience to strategic risk and related educational resources. With projected increases in stressors to U.S. agricultural systems via population growth, weather uncertainties, pest prevalence, and unpredictable market shocks, improving farm resilience should be a primary focus for producers in the years ahead. By identifying key farm characteristics associated with resilience, we provide a path for producers to improve resilience and mitigate impacts of strategic risk.