Risk management strategy essential for a livestock production enterprise

10 Feb, 2019 - 00:02 0 Views
Risk management strategy essential for a livestock production enterprise

The Sunday News

Mhlupheki Dube

IN one livestock social media platform, a renowned goat farmer remarked that we are back to 1992 and hence farmers should be ready for it.

The year 1992 was characterised by a severe drought and most smallholder farmers lost their livestock to poverty deaths and others sold them for a song to predatory speculators. Hence, this farmer proffered advice on what farmers need to do in order to mitigate against the drought effects.

Indications are already there that the year has already announced and confirmed itself as a disaster for farmers especially in Matabeleland region and other drier parts of the country. The social media piece from the farmer got me asking myself as to how many smallholder farmers have risk reduction and management strategies for their livestock businesses?

In fact, are they even able to list risks that their beef production enterprises face? It is my opinion that every livestock farmer should have an enterprise risk management strategy so that your reaction to a potential risk that has befallen your enterprise is thought through and planned.

The first risk to your enterprise is therefore the fact that you have no comprehensive knowledge of the risks facing your enterprise and consequently you have no risk management strategy in place. The beef enterprise risk management strategy therefore involves about five steps namely identifying the risks, avoiding the risk, controlling the risk, transferring the risk and accepting the risk.

As a farmer you should identify a comprehensive list of possible risk that may affect your enterprise. This list should also prioritise the risks in terms of their likelihood to occur and the level of impact it will have to your enterprise if it does happen.

The risk could be drying up of your dam and naturally it will have a tremendous effect on your animals as they struggle to get drinking water.

What is the likelihood of that happening this year, probably informed by last year and this year inflows into the dam? Avoiding the risk is the first logical mitigation process in risk management. Can the risk be avoided and how?

If for example there is a real risk of your older cows succumbing to the looming drought due to the clearly inadequate grazing, one way to avoid the risk would be cull the old cows and sell them now when you can still get better value from them rather than later when they are emaciated and no one is interested in them.

So, the question is how are you planning to avoid the risk that you have clearly identified and you are sure that it will happen during the course of the year? Another method of risk management is controlling the risk. This acknowledges that you have no ability to prevent the risk from happening but you can only minimise the chance of it happening and reducing the impact of the risk when it does happen.

As a smallholder farmer you may not have any control on the depletion of the grazing land especially in communal lands.

However, to mitigate on the effect of lack of grazing on your animals you can do a number of things such as culling excess stock and selling it especially the ones that can succumb easily to a drought.

You can cut, carry and store fodder for use during the lean season. Alternatively, you can buy and store commercial feed or hay bales using proceeds from your culled animals for use during the dry season. Transferring the risk as a management strategy is usually through taking an insurance cover for your enterprise. This is not very common in the beef enterprise with only a few insurance providers having tried products on livestock with minimum success. This simply means you could easily transfer the risk from your hands to the insurers and of course you pay a premium for this.

Therefore, if the risk does happen and your animals are affected you then claim from your insurance cover. As livestock farmers it is wise when faced with a looming drought as it is at the moment especially in the southern part of the country to plan mitigatory strategies for the pending risk rather than to bury your head in the sand and hope nothing will happen even when all signs are pointing to the probability of it occurring.

Don’t wait to panic when it’s already too late and start to run helter-skelter fire fighting, something which you could have easily and carefully planned to manage. Let’s have our enterprise risk management strategies in place so as to avoid unnecessary losses and stress.

Uyabonga umntaka MaKhumalo.
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