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Press release - Tuesday, November 4, 2014

ILVO-UGent doctoral thesis: Risk management on farms should become more tailored to the person and the context

Doctoral thesis on risk perception in agriculture:
Rethinking farmers’ intentional risk behaviour: The role of risk perception, risk attitude and decision context

Promotors: Prof Ludwig LAUWERS, Faculty of Bio-Engineering Sciences, Ghent University - Social Sciences Unit, ILVO; and Prof. Erwin WAUTERS, Social Sciences Unit, ILVO

When classical methods for risk analysis and risk management are applied in agriculture, they lack efficiency because they do not take the typical interactions between the risk factors and the context into account. This is the conclusion from F. van Winsen’s doctoral research. He has developed an alternative method that can visualize how farmers experience risk on the farm level, which interactions there are between risks, and how the context influences the experience of risk. In other words, this method clarifies the complexity of the risks.

The new method is not only useful to discover the individual perception of risks and their interactions. It can also be used with farmer groups and advisors to map the entire sector, which is useful for advisors and policymakers to communicate about risks and risk management strategies. The knowledge of the interaction between various risks ultimately influences agricultural policy. Van Winsen believes that the regulations meant to strengthen risk management on farms should not concentrate on one single risk with a related set of regulations, but should rather contain a diverse set of regulations.

The importance of risk management

The study of risks in agriculture is gaining more attention recently. Less governmental market protection means that risk management is being shifted from the government to the individual farmer. For this reason, risk management is one of the most important success factors in farming today. Risk is not measurable, but rather a subjective experience of threats and insecurities. Thus we must understand how farmers experience risk and deal with it, and the context within which risk occurs.

Farmers most concerned about long-term evolutions

Using interviews, surveys, farm accountancy data and scientific literature, Franwin van Winsen studied the reality of risk in agriculture and how farmers deal with it. He found that they were far more concerned about long-term market and price evolutions than short-term price volatility and issues such as weather or diseases that could diminish crop yield. Instead of contracts and insurances, farmers are much more likely to tighten their belt and diversify their income streams as a risk management strategy.

A tangled web of risks

Agricultural risks are often interconnected, which creates a link between harvest and price. If an incident such as a storm happens and destroys a large part of the harvest, prices will rise. In this sense, harvest risks, market risks, financial or personal risks are interconnected in the farmer’s experience. Classical methods analyse only one risk at a time and thus fall short of the farmer’s needs. Farmers will also choose risk management strategies with a specific context; they know how other farmers handle the same risk, or who is providing the information about this risk. Their choices are also influenced by intangibles such as their personal relationship with a company with whom they may or may not enter into a contract.

Contact

Frankwin van Winsen, doctoral student, frankwin.vanwinsen@ilvo.vlaanderen.be, +32 9 272 23 67
Greet Riebbels, ILVO Communication, greet.riebbels@ilvo.vlaanderen.be, +32 486 26 00 14
Erwin Wauters, promotor (Ghent U & ILVO, ag economist) + 32 472 45 75 14
Ludwig Lauwers, promotor (ILVO Social Sciences Unit) +32 491621368