Agriculture is bedeviled with a lot of risks and uncertainties due to the nature of agricultural production. Yet, a greater percentage of Nigerians earn their livelihood from this sector than from all other economic sectors combined.

In Nigeria, households that depend on income from agriculture either through self-employment or as agricultural labor account for about 70% of the population. Farming, unlike other enterprises, is concerned with living things plants and animalswhich are subject to both biotic and abiotic factors that influence production and productivity.

Some inherent characteristics of agricultural production and agricultural products subject farming to innumerable risks and uncertainties.

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Definition and Key Aspects of Agriculture

Meaning of Agriculture and Characteristics of Agricultural Production

Agriculture describes the practice of growing crops or raising animals. Someone who works as a farmer is in the agriculture industry. It encompasses the science, art, and business of cultivating soil, producing crops, and raising livestock.

The definition of agriculture includes the systematic growing and harvesting of plants and rearing of animals to sustain life, producing food, feed, fiber, and other products. Agriculture deals with farming and/or raising livestock (Chantrell, 2002).

Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that enabled people to live in cities. The history of agriculture began thousands of years ago.

After gathering wild grains beginning at least 105,000 years ago, nascent farmers began to plant them around 11,500 years ago. Pigs, sheep, and cattle were domesticated over 10,000 years ago.

Plants were independently cultivated in at least 11 regions of the world. Industrial agriculture, based on large-scale monoculture in the twentieth century, came to dominate agricultural output, though about 2 billion people still depend on subsistence agriculture (Anderson, 2020).

Crops and livestock are living things; hence, they are subject to both biotic and abiotic factors, which have made their production subject to risks.

Features of Agricultural Production and Associated Risks

1. Biological Process

Agricultural production is a biological process. The growing of crops and rearing of livestock are biological processes. Crops germinate, grow, and reproduce through natural processes. Chickens, sheep, goats, cattle, and other livestock grow and reproduce through natural processes.

Although many inputs may be industrial products such as fertilizers, agro-chemicals, feeds, and mechanical implements, the commodities themselves result from biological activities over which humans have limited influence.

The implications of this are twofold: first, weather conditions may not be favorable, leading to reduced output. This is known as production or output risk.

Secondly, within the natural time limit of a production cycle, nothing can be done to hasten or lengthen the production of agricultural products. Even if demand unexpectedly increases while production has not completed its cycle, supply cannot respond.

This subjects the farming enterprise to input risk. On the other hand, many industrial production processes can be manipulated to meet demands as they arise, and fluctuations in prices can easily be moderated.

2. Seasonality

Closely related to the fact that agricultural production is biological is the fact that it is also seasonal. The production of many crops depends on seasons, especially the rainy season. Many crops are rain-fed and may not be produced during the dry season.

Although irrigation is used to remove this bottleneck in some cases such as with maize, rice, and some vegetables this is practicable only under high-level technology and large-scale agriculture.

Most farmers still depend on rainwater for their production, especially as water sources for irrigation may be unavailable or dependent on rain. This weather condition a major determinant in crop production subjects crop production to climatic risk, which falls under the umbrella of production risk.

Many other agricultural production processes depend on the seasons for full output. Some crops sensitive to photoperiodism perform well during certain periods of the year. Cowpeas, melon, and groundnuts are known to be sensitive to the time of planting. Some livestock are known to reproduce in large numbers at certain periods of the year.

For example, pigs and layer poultry respond negatively to the heat stress of the peak of the dry season. The implication of this characteristic is that agricultural products come into the market in large quantities at certain periods (the glut period) and are scarce during the lean periods, thus creating fluctuations in prices. Price variability subjects agricultural production to price risk.

3. Structure of the Industry

The structure of the agricultural industry also subjects farming enterprises to price risk. The production of agricultural commodities is in the hands of small-scale farmers who are scattered about; small quantities are put on the market, and their forces are beyond the control of the farmers. Farmers are subject to market price fluctuations, as well as poor price elasticity of demand and supply.

This is a result of the biological nature of agricultural production and seasonality. The supply of agricultural products does not respond well to changes in demand and price. Similarly, the price elasticity of demand is poor.

The proportionate changes in either the supply or demand for agricultural commodities are always less than the proportionate changes in price. The implication is that farmers find it difficult to take advantage of price changes in the market, and prices of agricultural products can get out of control.

4. Uncertainty of Agricultural Production

Agriculture is often characterized by high variability of production outcomes, or production risk. Unlike most other entrepreneurs, agricultural producers are not able to predict with certainty the amount of output that the production process will yield due to external factors such as weather, pests, and diseases. Agricultural producers can also be hindered by adverse events during harvesting that may result in production losses.

In conclusion, agricultural production, unlike other enterprises in other sectors of the economy, undergoes a biological process that makes it dependent on factors beyond the control of farmers, thereby subjecting farming to innumerable risks.

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