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Abstract
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”.