Policies on Managing Risk in Agricultural Markets

Over the past dozen years, policymakers
have largely abandoned long-standing popular approaches for
addressing risk in agriculture without fully resolving the
question of how best to manage the negative consequences of
volatile agricultural markets. The article reviews the
transition from past policies and describes current
approaches that distinguish between the trade-related fiscal
consequences of commodity market volatility and the
consequences of price and production risks for vulnerable
rural households and communities. Current policies rely more
heavily on markets, even though markets for risk are
incomplete in numerous ways. The benefits and limitations of
market-based instruments are examined in the context of risk
management strategies, and innovative approaches to extend
the reach of risk markets are discussed.