Risk Management and Financial Literacy Practices of Rural Kentucky Farmers

This study sampled 112 farmers from Kentucky and measured their financial literacy levels, risk management practices, demographics, and operational information. The agricultural landscape in the United States has shifted from small, family farms to larger farms, making it difficult for small farmers to compete. Previous studies have identified financial literacy and risk management practices as potential competitive advantages for small family farmers. Predictive relationships between financial literacy levels, small farmer demographics (age, gender, income, education, years of experience, credit score, land ownership, acres farmed, and farm type), and risk management levels were examined using linear regression. The study found that as a farmer's acreage increased, so did their use of risk management tools. Additionally, farmers who raised only livestock adopted fewer risk management tools than those who raised livestock alongside crops. Farmers without a college education were less likely to use risk management practices than those with graduate degrees. No predictive relationship was found between farmers' financial literacy levels and other variables. Findings indicate that additional research is needed on competitive indicators for small, rural farmers in Kentucky and across the greater United States.