Farmers’ Attitudes towards Risk—An Empirical Study from Poland

Piotr Sulewski,Kinga Pogodzińska,Adam Wąs,Magdalena Szymańska,Paweł Kobus,Tomasz Sosulski

doi:10.3390/agronomy10101555

Piotr Sulewski, Kinga Pogodzińska + Show 4 more

Open Access

https://doi.org/10.3390/agronomy10101555

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Abstract

Risk aversion is an important research area in the field of agricultural economics in the last years. Creating effective and efficient risk management tools in an increasingly volatile economic and natural environment requires proper recognition of farmers’ behavior and attitudes towards risk. In this context, the main aim of the paper was to estimate farmers’ attitudes towards risk and identification of farm’s and farmer’s characteristics in dependency on risk aversion level. The assessment of farmers’ preferences towards risk was based on hypothetical games in a representative sample of 600 Polish farms—participants of Farm Accountancy Data Network (FADN). Based on the interviews with farmers, a relative risk aversion coefficient has been estimated. Results revealed that on average Polish farmers have quite a strong risk aversion. Their attitudes towards risk are strongly linked with their self-assessment regarding their way of making decisions under risk. Some relations between farmers’ risk aversion and perception of selected risk factors could also be observed. The results revealed that the application of specified risk management tools by farmers and their potential reaction to a significant income drop are related to risk aversion level.

Highlights

The problem of risk aversion has been one of the critical research areas in the field of agricultural economics in the last years [1,2]
The results of analyses showed that most farmers exhibit at least a medium or high level of risk aversion
This is consistent with many other research results which indicated that farmers, as a rule, show risk aversion, not necessarily too strongly [20,31,61,110]

Summary

Introduction

The problem of risk aversion has been one of the critical research areas in the field of agricultural economics in the last years [1,2]. As emphasized by many researchers [5,6,7], knowledge of farmers’ preferences towards risk is essential for farmers themselves, for advisory services, industry (providing production and food processing agents), and policymakers. By knowing their own risk preferences, farmers can better manage their farms. For the industry providing production resources (fertilizers, plant protection chemicals, machinery, financial services), being aware of farmers’ risk attitudes can allow them to offer innovative products and services better suited to the needs of farmers. The processing industry can better anticipate fluctuations in the supply of agricultural raw materials

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