How California agricultural producers manage risk

Abstract

In a statewide survey, California agricultural producers ranked output price and input cost highest among their production and financial risks. Due to poor availability of hedging, forward contracting and crop insurance, less than 25% of the respondents used these tools to reduce risk. Diversification of production or income sources was their most common strategy for managing risk. Until risk tools are better tailored to the needs of California producers, and until producers become better informed about managing income risk, the state's agricultural sector will face unnecessarily high levels of financial stress.