Surviving as an Argentine Farmer: Factors that Influence Risk Management Strategies

Abstract

Agricultural production is a challenging business in Argentina due to output variability, unfavorable government policies, and the absence of public risk management programs. Based on probit modeling and information surveyed from producers farming in the Humid Pampa, this paper studies the influence of (a) risk attitudes, (b) risk perceptions, and (c) socioeconomic factors on the probability of choosing five different risk management strategies. Besides confirming that some results previously found in the literature apply to the Argentine case, we find that local farmers have a particular understanding of specific risk management strategies. Some strategies usually applied to reduce risks, such as the use of futures markets or vertical integration are perceived by Argentine farmers as risk-increasing. Cost control is the
preferred strategy for risk-averse farmers. Policymakers and companies providing services should take into consideration the particular way in which Argentine farmers perceive and manage risks to build a common
language.