Managing Losses in An Economic Downturn

Abstract

<p>The high level of prosperity in the agricultural sector in recent years has been most unusual, thanks to several factors including increased exports which reflects improving incomes in low income countries, favorable weather condition and increased demand for commodities used in producing biofuels. Typically, commodity prices well above the cost of production lure farmers and ranchers into increasing output and driving commodity prices downward. It is often said that farmers and ranchers are the world’s best economic citizens . . . give them half an incentive and they promptly increase production and destroy their own prosperity. Concern about losses tends to fade as commodity prices rise but that concern returns in times of downturns in commodity prices. The decline in commodity prices in 2014 and 2015, which promises to continue well into 2016 at least, is expected to focus renewed interest in managing losses.1 This article focuses attention on the losses most likely to be encountered as commodity prices decline.</p>