Agricultural risks stem from different sources, which can be internal or external; human beings, farmers’ families, or animals; natural occurrences, outbreaks of pests and diseases, and the actions or inactions of governments and neighboring farmers.

Sources of Risks in Agriculture

The following are the major sources of risks discussed in this article:

Natural hazards
Market fluctuations (of output prices)
Social uncertainty (due to differences over control of resources)
State actions and wars

1. Natural Hazards

Weather is a critical production factor in agriculture. Unfortunately, this factor can hardly be controlled. Weather risks are a major source of uncertainty in agriculture, and fluctuations in temperature and precipitation have even increased in the last decade due to global climate changes.

Hydro-meteorological risks such as droughts, cyclones, and floods not only endanger human lives and property but also have a devastating impact on food production and farmers’ livelihood systems. Farm communities in resource-poor, rain-fed regions, which lack inbuilt buffering mechanisms, are disproportionately vulnerable to the severity of extreme climate events.

Climate change further compounds the problem, as it threatens to alter the frequency, severity, and complexity of climate events, as well as the vulnerability of high-risk regions in different parts of Nigeria.

Drought or excess rain is responsible for bad harvests worldwide. While the most obvious impact of weather risk is on crop yields, its relevance is not limited to crop production.

The performance of livestock farms, the turnover of processors, the use of chemicals and fertilizers, and the demand for many food products also depend on the weather. Hence, large parts of the agribusiness sector are affected by weather risks.

Outbreaks of pests and diseases are another natural hazard that influences animal production. An outbreak of disease may wipe out an entire poultry farm, causing significant losses to farmers. Floods and droughts are also natural hazards that affect both crop and animal production.

2. Market Fluctuations

Fluctuations in market output, particularly fluctuations in prices, are another source of risk in the agricultural industry. The gestation periods of crops (the period between planting and harvest) may be short or long.

The price of a particular agricultural product may be very high during the planting season, but at the time of harvest, the price often falls due to increased supply. However, the high price of the product during planting may have encouraged farmers to plant large hectares of the crop. The subsequent fall in price leads to a reduction in net farm income.

3. Social Uncertainty

This source of risk relates to differences in control of resources. The resources in the agricultural industry are land, labor, capital, and entrepreneurship. An increase in the earnings of these inputs or resources may attract resources to other sectors of the economy at the expense of agricultural production. This shift negatively affects output and farmers’ income.

4. State Actions and Wars

Wars and social actions pose significant risks to the agricultural industry. Conflict is an ever-present risk and one of the most common causes of food insecurity.

The displacement of people and the disruption of agricultural production and food distribution leave tens of millions at risk of hunger and famine. Conversely, food insecurity may lead to or exacerbate conflict.

The experience of Nigerians during the civil war between 1967 and 1970 is a notable example of the effects of war on farm businesses.

5. Actions and Inactions of Neighboring Farmers

Most people have family, business, and personal goals. Typically, farmers have goals that may compete or complement one another. Apart from family goals and actions, the practices of neighboring farmers can also be a source of risk.

In developing countries, where small-scale farming is prevalent, if a farmer diligently keeps their farm clean while a neighboring farm is weedy or bushy, the neighboring farm may serve as a hideout for rodents and other animals that can destroy the crops of the diligent farmer. In risk management, farmers need to be aware of these interrelationships among goals and business enterprises.

In this article, it has been established that almost all sources of agricultural risks are external in nature, meaning farmers have little to no control over these risk agents. Nevertheless, it is still expected that farmers will plan and prepare for their mitigation.

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