Rethinking farmers’ intended risk behaviour: The role of risk perception, risk attitude and decision context

Frankwin van Winsen

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    This Chapter reports the results of a survey eliciting risk perceptions, attitude towards risk and the perceived usefulness of risk management strategies of Flemish farmers. The questions addressed in this survey are: What aspects do farmers find the most worrisome for the future of their business? How much control do they have over these aspects? What is the general attitude of farmers towards risk? And how useful do farmers perceive particular management strategies to ensure viability in uncertain times?

    Farmers’ risk management strategies are to a large extent guided by their subjective probabilities of adverse events, i.e. risk perception, and their risk preferences, i.e. risk attitudes (e.g. Hardaker et al., 2004). According to Bard and Barry (2000), the key components in risk analysis with a view to develop strategies and policies are identifying the sources of risk, evaluating risk management strategies and tailoring risk advice to the risk attitudes of individuals. As such, sound and representative knowledge about what kind of risks farmers perceive, what their attitudes towards risk are and how they perceive the value of different risk management strategies can offer valuable insights supporting the design of risk management policies and instruments. Understanding farmers' decisions under risk and uncertainty can aid policymakers to achieve their objectives, such as safe and adequate food, reasonable and stable standard of living for farmers and sustainable production (OECD, 2009). Additionally, region-wide surveys are important, in order to inform policymakers, advisers and researchers on the relevant perceptions and intentions about risk and risk management.

    Early studies on the subject of how risk management and risk perception are related include the study of Wilson et al. (1988) who surveyed Arizona dairy farmers. The authors found that concerns about inputs such as feed, labour and capital were equally important as fluctuating milk prices and milk production per cow. In addition, they found that farmers’ management responses were very consistent with these perceptions, for instance, the surveyed dairy farmers engaged in forward contracting arrangements for feed. In recent times, risk perceptions and the adoption of risk management strategies have been investigated in the U.S. by, amongst others, Patrick and Wilson (1985), Patrick and Musser (1998; 1997), Coble et al. (1999), Mickelsen and Trede (2001), Musser and Patrick (2002) and Hall et al. (2003). Harwood et al. (1999) summarized the results of a number of nation-wide surveys on risk perception and risk management in the U.S, most of which were unpublished. McCarthy and Thompson (2007) reported the results of an Australian survey on risk perception, risk attitudes and risk behaviour. Martin (1996) and Martin and McLeay (1998) investigated the diversity of New Zealand farmers’ risk management strategies.

    Similar risk management surveys in the EU are scarcer. Meuwissen et al. (2001) studied the risk perceptions and risk management of Dutch livestock farmers. Price and production risk were found to be the most important risks. Insurance schemes mixed farmers compared to specialist dairy and pig farmers. Akcoaz and Ozkan (2005) conducted a risk survey in Turkey aimed at identifying and clustering risk sources and risk management strategies. Policy risks and risks associated with prices and production were considered the most significant risk sources, whereas personal risks were among the least important. With respect to risk management strategies, diversification was identified as the most valid option. In general, previous literature confirmed that farmers perceive market risks, production risk and institutional risks to be the most important sources of risk. Further, farmers are shown to be highly risk averse to risk neutral, although no general consensus on risk attitude is found (Reynaud and Couture, 2012).
    TaalEngels
    Gedrukte ISBN's9789059897410
    StatusGepubliceerd - 4-nov-2014

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