The risks of the trade and how to reduce them: prices, diseases, climate, theft, dependence on one customer

This lesson is part of Farm manager: finance, growth, succession specialisation. It opens to every registered student, from free registration. Levels 1 to 5 and the tracks remain readable by everyone.

The farmer suffers risks; the farm manager knows them by name, knows how much each can cost him as a percentage of his profit, and has decided coolly which ones he reduces first. A price falling by 8%, a sick flock, a poorly managed hot season, two bags disappearing every week, a customer taking more than half the chickens: none of these five risks can be removed, all can be reduced, and the order in which you deal with them depends on a calculation, not on a fear. This lesson gives the grid to rank risks, the costing of each one on the three-house farm, and the safeguards that cost less than they protect.

• ✓Rank the risks of a poultry farm with a probability × severity grid and decide the order of the safeguards
• ✓Quantify as a percentage of profit the effect of a price drop, a feed price rise, a sick flock, regular theft and the withdrawal of a large customer
• ✓Choose for each risk the safeguards that cost less than they protect, and know what remains for the reserve to carry
• ✓Write the farm's risk reduction plan: safeguard, person responsible, deadline, follow-up

1. Naming the risks and ranking them
2. Price risk: the one that eats most and shows least
3. Diseases and climate: technique is the first safeguard
4. Theft: small every week, enormous every year
5. Dependence: one customer, one supplier, one person
6. Going further

• •Grid probability (1 to 3) × severity (1 to 3): deal first with scores 6 and 9; on the example farm, price is at 9, feed, disease and heat at 6, theft at 4, the large customer at 3 but with maximum severity.
• •Price −8% = −80% of profit; −10% = zero profit; feed +10% = −62%; both together = a loss; safeguards: spread sales, write prices, link purchase and sale, diversify the product.
• •Severely affected flock (mortality 25%, 1.7 kg, FCR 2.30): 1,530 kg sold, loss of 0.68 unit, more than two flocks of profit wiped out; safeguards: clean-out, biosecurity, the area veterinarian's programme, daily surveillance.
• •Heat: FCR 1.95 over six flocks = 1.1 unit = 11% of profit; theft: 2 bags a week = 5,200 kg = 4.3 units = 43% of profit, disguised as an FCR of 1.98; the bag record stops it.
• •Dependence: no customer above 30%, three buyers, two feed suppliers, one stand-in per post; the withdrawal of a 45% customer costs about 80% of profit; the reserve absorbs the rest.