Farmers commit to costs long before they know what they will be paid. Prices for grain, livestock, fertilizer, and fuel can move sharply with weather, markets, and policy. That gap between commitment and sale is commodity price risk.
Tools for managing it include forward contracts, futures and options, crop insurance revenue products, and simply spreading sales over time. Planning should test a range of prices against breakeven levels, so the business knows which outcomes it can absorb and which call for protection.