What is price risk management?

Nov. 5, 2026

By Mary Hightower
University of Arkansas Division of Agriculture

Fast Facts

• Risk runs through grain supply chain
• Fryar Center research enhances understanding of risks related to pricing
• Center produces user-friendly tools to help ag manage risk

(377 words)

(Newsrooms: With ‘Price risk management: We all do it’)

DOWNLOAD related of McKenzie

FAYETTEVILLE, Ark. — Uncertainty — or risk — permeates every stage of a farm commodity’s life from the time seed hits the soil to its ultimate use as food, fuel or fiber.

Some of the risks — forces of nature such as weather, insects and diseases — are familiar. However, there are an infinite number of factors that can introduce risk, such as war, a closed bridge on a major interstate, or policy changes in the United States or abroad.

Increasing understanding of the risks related to commodity pricing is the mission of the Fryar Price Risk Management Center of Excellence.

“Any type of business hates uncertainty, and price risk is one of the costliest forms of business uncertainty,” said Andy McKenzie, professor, Fryar Endowed Chair and associate director of the Fryar Price Risk Management Center of Excellence.

“Any type of business hates uncertainty, and price risk is one of the costliest forms of business uncertainty,” said Andy McKenzie, professor, Fryar Endowed Chair and associate director of the Fryar Price Risk Management Center of Excellence

“Grain farmers face price risk with respect to the crops they produce,” he said.

“Before harvest, they don’t know what price they’ll be able to sell their grain for — that’s price risk,” McKenzie said. “If they don’t sell at harvest but instead choose to store their grain, they don’t know what price they will eventually sell their grain for. That’s price risk too.

“And given grain prices change a lot over time, this is a lot of risk,” he said.

“At the other end of the supply chain are firms that use grain as an input,” McKenzie said. “These end users also don’t know what price they will have to pay for grain to produce chicken, beef or ethanol. Again, price risk.”

In the middle part of the supply chain, “grain firms buy, store and then sell grain without knowing what prices will be, and given they trade grain in huge quantities, this is significant price risk,” he said.  

From research to reality

Fryar Center researchers increase understanding of price risk through the whole supply chain. The research is then used to help the agriculture sector in several ways, including development of user-friendly decision-making and analytical tools, and outreach through a podcast, in-person and virtual meetings, white papers, fact sheets and a book, Physical Grain Trading: Core Concepts and Real-World Scenarios, by McKenzie.

Among the tools created by the center are:

• Arkansas Crop Profit/Loss Calculator
• Margin Protection Payment Estimator
• Heifer Investment Analysis
• ARC-CO and PLC Decision Tool.

About the Fryar Center

Established in 2020 through a generous gift from Dr. Ed and Michelle Fryar, the Fryar Price Risk Management Center of Excellence is housed within the Department of Agricultural Economics and Agribusiness at the University of Arkansas.

The Center advances the University's land-grant mission through research, teaching, and outreach focused on critical risk-management challenges facing agriculture and the broader food and fiber system. While the Center places particular emphasis on industries important to Arkansas agriculture, its faculty and programs address risk-management questions with national and global relevance.

About the Dale Bumpers College of Agricultural, Food and Life Sciences: Bumpers College provides life-changing opportunities to position and prepare graduates who will be leaders in the businesses associated with foods, family, the environment, agriculture, sustainability and human quality of life; and who will be first-choice candidates of employers looking for leaders, innovators, policy makers and entrepreneurs. The college is named for Dale Bumpers, former Arkansas governor and longtime U.S. senator who made the state prominent in national and international agriculture. For more information about Bumpers College, visit our website, and follow us on X at @BumpersCollege and Instagram at Bumpers College. 

About UADA

The University of Arkansas Division of Agriculture’s mission is to strengthen agriculture, communities, and families by connecting trusted research to the adoption of best practices. Through the Agricultural Experiment Station and the Cooperative Extension Service, UADA conducts research and extension work within the nation’s historic land-grant education system.  

UADA is one of 22 entities within the University of Arkansas System. It has offices in all 75 counties in Arkansas and faculty on three university campuses.   

Pursuant to 7 CFR § 15.3, UADA offers all its Extension and Research programs and services (including employment) without regard to race, color, sex, national origin, religion, age, disability, marital or veteran status, genetic information, sexual preference, pregnancy or any other legally protected status, and is an equal opportunity institution. 

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Media contact
Mary Hightower
mhightower@uada.edu