Risk Management Education: An Examination of Crop Producers' Participation in Recent Programs and of Their Desire for Additional Training

By Knight, Thomas O.; Coble, Keith H. et al. | Journal of Agricultural and Applied Economics, December 2003 | Go to article overview

Risk Management Education: An Examination of Crop Producers' Participation in Recent Programs and of Their Desire for Additional Training


Knight, Thomas O., Coble, Keith H., Patrick, George F., Baquet, Alan E., Journal of Agricultural and Applied Economics


Risk management education has been a focus of U.S. farm policy since 1996. In support of significant ongoing United States Department of Agriculture (USDA) educational efforts, this study examines agricultural producers' educational needs and interests. Data obtained through a survey of crop producers are used in probit models examining interest in additional training in five areas including forward contracting, futures and options, crop yield insurance, crop revenue insurance, and financial management. The study results should be useful in determining appropriate risk management education program content and in identifying and tailoring to specific target audiences.

Key Words: commodity futures, commodity options, crop insurance, forward contracting, risk management

JEL Classifications: D81, D83, Q16

Risk issues have dominated U.S. farm policy deliberations since the 1996 FAIR Act was signed into law. Enactment of this legislation and contemporaneous trade liberalization measures stimulated a vigorous debate regarding the capacity of farmers to cope with the loss of income-stabilizing deficiency payments (Collins and Glauber). This debate intensified in 1998, when regional yield losses and commodity price declines led to a substantial drop in net cash farm income from market sources. Disaster legislation, passed in that year, marked the first departure since 1994 from a policy objective of avoiding reliance on ad hoc disaster assistance. Similar legislation in 1999 and 2000 raised direct government payments to farmers to record levels of more than $20 billion in each year. This repeated resort to ad hoc disaster programs led the 106th Congress to focus on strengthening the farm income safety net, with lengthy deliberations culminating in enactment of the Agricultural Risk Protection Act of 2000. Additional risk protection was incorporated into the Food Security and Rural Investment Act of 2002 in the form of counter-cyclical payments designed to mitigate the effects of troughs in commodity price cycles. These payments were added to the preexisting fixed payments and the marketing loan programs. In total, an additional $37.6 billion over 6 years was added to commodity program spending.

Throughout the period since 1996, public policies directed toward strengthening the farm income safety net have emphasized the importance of risk management education. Provisions of the FAIR Act directed the USDA to provide appropriate risk management educational programs for U.S. farmers. Further, the act amended the National Agricultural Research, Extension, and Teaching Policy Act of 1977 to include improvement of risk management in the agricultural industry as one of eight specific purposes of agricultural research, extension, and education. Thus the FAIR Act clearly established risk management education as a policy priority. In response to this mandate, the Secretary of Agriculture designated $5 million in fiscal year 1998 funding to support a risk management educational initiative.

Continued federal government commitment to risk management education was evident in the Agricultural Risk Protection Act of 2000. This legislation provided $5 million annually for fiscal years 2001-2005 to enhance educational programs of the Risk Management Agency (RMA). An additional $5 million per year was provided for risk management educational programs to be supported through competitive grants programs administered by the Cooperative State Research, Education, and Extension Service (CSREES). Other sec tions of the Act were less explicit in their educational objectives, but may direct additional financial support to risk management education.1

Given a continuing policy emphasis on risk management education, it is essential to understand agricultural producers' educational needs and interests. The purpose of this paper is to examine these issues, making use of data obtained through a four-state survey of crop producers conducted in support of the USDA's 1998 risk management education initiative.

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