Farmers’ risk perception, risk aversion and strategies to cope with production risk: an empirical study from Poland

Sulewski, Piotr and Kłoczko-Gajewska, Anna (2014): Farmers’ risk perception, risk aversion and strategies to cope with production risk: an empirical study from Poland. Studies in Agricultural Economics, 116 (3). pp. 140-147. ISSN 2063 0476

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Abstract

Agriculture is an activity burdened with multiple risk factors, some of which are related to the biological nature of production. Climate change, liberalisation of international agricultural trade and changes in the agricultural support system mean that the importance of risk in agriculture will increase. This means that increasing attention will be given to risk management at the farm level, although implementation of the appropriate risk management strategy is connected to farmers’ perception of, and aversion to, risk. This study, which integrates these three aspects of risk in agriculture, is based on data collected from almost 600 participant farms from the Polish FADN system. It was shown that drought is perceived by farmers as the main factor of risk in production in Poland. Polish farmers are rather risk averse, but a little more in terms of their personal health and less in the case of the farm. The analysis showed that the following factors increased the level of risk aversion of Polish farmers: debt ratio, losses in production in previous years, soil quality and concentration on financial independence as a hierarchy of priorities. The most important risk-coping strategy was crop insurance. Knowledge of farmers’ perception of risk, risk aversion and preferred risk management strategies is essential for creating policy instruments to support agricultural risk management, and for the development of training programmes tailored to the needs of farmers.

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