Tools and polices for agricultural risk management

Volatility in international agricultural commodity prices has been higher since 2000 than in the previous two decades (FAO, 2011). This fact and a movement away from excessive government intervention into agricultural markets have increased focus on the need for private risk management markets and strategies. WTO green box rules and a newly emerging holistic approach to agricultural risk management undermine the use of historically popular stabilisation tools such as price support mechanisms, border protection and public intervention. This paper reviews the market tools and government policies that currently exist for managing agricultural risk. A multi-criteria analysis is adopted to critique the various risk management tools available. Tools are assessed according to criteria such as costs (by whom they are incurred), benefits (to whom they accrue), political and budgetary acceptability, feasibility, functionality and effectiveness in controlling risk. This allows for all tools reviewed to be ranked according to the various criteria. It is argued that governments should support the development of private solutions to agricultural risk and that government risk-related policies should focus on “residual risk”.

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Conference Paper/ Presentation
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JEL Codes:
Q18; D81

 Record created 2017-04-01, last modified 2018-01-22

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