Agricultural Economics Department


Date of this Version

February 2008


Published in Cornhusker Economics, 02/06/2008. Produced by the Cooperative Extension, Institute of Agriculture and Natural Resources, Department of Agricultural Economics, University of Nebraska–Lincoln.


We are again experiencing economic times in which one sector of the agricultural economy is experiencing prosperity while other sectors struggle. Ethanol has created an increase in demand for corn, while it has also increased the cost of feed for livestock producers. Agricultural profits have historically been cyclical. Some years produce high profits (boom), some years produce low profits and some years no profits (bust). Managing the risks associated with today’s farm and ranch operations is crucial. Market volatility, increased input costs and large capital requirements are among the factors contributing to the risk of potentially negative financial impacts associated with production agriculture. An effective financial risk management strategy is a key factor for farm and ranch business success.