1. Risk and Risk Management in the Sheep Sector András Nábrádi - Hajnalka Madai Department of Farm Business Management, Faculty of Agricultural Economics and Rural Development, Centre for Agricultural Sciences, University of Debrecen, Hungary Summer University on Information Technology in Agriculture and Rural Development August 21-22 2006

2. The aim of the research ► To reveal general circumstances of sheep farmers and producers in Hajdú-Bihar County. ► To survey risk and risk sources of sheep farming in the Region. ► To survey the applied risk management techniques.

3. Methodology ► Studying of international and Hungarian technical literature, - methods and examples. ► Personal interviews and questioners - with experts and farmers

4. Categories of Risk Sources and Risk Management Techniques Categories of Risk Sources and Risk Management Techniques BUSINESS RISK Production: type, technological and environmental conditions and circumstances Market: prices of outputs and inputs, co-operation Institutional/Legal: regulation, restrictions, laws, supports, information, contracting, insurance, security Personal/Human: age, attitude, family, background, education and skills, labor FINANCIAL RISK techniques and methods of dealing with finance, dept and payment management, diversity of investment RISK MANAGEMENT TECHNIQUES Production Marketing Financial

5. Method of survey and processing data ► 144 decoded questions in 3 main groups  Risk and risk sources  Risk management methods and application  Basic data survey of producers and farms ► Softwares: MS Excel and SPSS 10.0 ► Processing 516 sheep breaders and studied farms, among them 512 were relevant

6. Results – Risk Sources

7. The Most Important Risk Sources  5.1 Risk of Rainfall Quantity and Distribution during the year ( 4,24)  5.5 Price Risk of Sheep Products (4,19)  5.6 Price Risk of Lamb (4,08)  5.24 Risk of Costs and Input Prices (3,88)  5.2 Risk of Other Weather Conditions (3,6)  5.4 Risk of Epidemics (3,5)  5.28 Changes in Hungarian Agricultural Policy(3,5)

8. The Least Important Risk Sources  5.15 Risk of Lack of Seep Milk Selling Contracts (1,79)  5.7 Price Risk of Sheep Milk(1,82)  5.25 Risk of Fluctuation of Interest Rates (2,10)  5.35 Risk of Increasing Hired Labor Cost (2,19)  5.22 Breaking Contracts (2,26)

9. Other Risk Sources at About the Average  5.42 Risk of Lack of Integration of Producers (2,56)  5.33 Risk of Accident and Health Problems (3,43)  5.36 Risk of Theft and Security (3,46)

10. The most Frequently Used Management Techniques % Using Mean ► ► Cooperation, integration of producers 74,43,8 ► ► Maintaining feed reserves 73,63,5 ► ► Up-to-date market information 65,93,7 ► ► Monitoring of pest, diseases, crops, prices 63,43,7 ► ► Weather forecasting 60,73,6 ► ► Security, safeguarding 58,33,8 ► ► More crop variety, breed, or dual-purpose animals 58,13,5

11. The Least Frequently Used Management Techniques % Using Mean ► ► Forward contracting 28,9 3,4 ► ► Long term flexibility 27,9 3,2 ► ► Not producing to full capacity 25,8 3,6 ► ► Irrigation of crops and grassland 20,0 3,7 ► ► Off-farm investment in other industries 18,0 3,7 ► ► Debt management, monitoring, 16,3 3,6 ► ► Keeping dept low 16,1 3,5

12. Ranks of Risk Sources and Risk Management Techniques Ranks of Risk Sources and Risk Management Techniques BUSINESS RISK Production: type, technological and environmental conditions and circumstances 3,1 Market: prices of outputs and inputs, co-operation 2,8 Institutional/Legal: regulation, restrictions, laws, supports, information, contracting, insurance, security 3,0 Personal/Human: age, attitude, family, background, education and skills, labor 2,7 FINANCIAL RISK techniques and methods of dealing with finance, dept and payment management, diversity of investment 2,8 RISK MANAGEMENT TECHNIQUES Production average use: 42,7 % 3,6 Marketing average use: 51,6 % 3,6 Financial average use: 28,6 % 3,6

13. Suggestions ► To train farmers applying different risk management strategies and techniques. ► To support (by the government and the EU): - co-operations and integration of producers, value chain - finding other alternative income sources, (processing, specialization) - producing good quality sheep product (value added). ► To assist farmers with information and extension services.

14. Thank you for your attention