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Agricultural futures markets in LDCs: a policy response to price volatility?

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  • C. W. Morgan

    (School of Economics, University of Nottingham, Nottingham, UK)

  • A. J. Rayner

    (School of Economics, University of Nottingham, Nottingham, UK)

  • C. Vaillant

    (School of Economics, University of Nottingham, Nottingham, UK)

Abstract

Recent policy reform in LDCs has centred on liberalizing markets and removing state intervention. This is of great importance for exporters in these nations as they are becoming exposed to greater price risk. Given the prominent role played by primary commodities in the exports of LDCs it is of interest to see how producers in these markets respond to the new, more uncertain environment. Intervention is no longer feasible or desirable and thus market based measures and risk-management instruments are becoming more popular as a means of reducing risk. This paper discusses one such measure-futures markets-in the light of the possibility of their use in LDCs and explores some of the key issues surrounding the question of whether LDCs should establish new exchanges domestically or simply use existing (often DME) exchanges. To illustrate the effectiveness of futures markets, the paper provides a brief summary of recent attempts by producer nations to employ hedging to minimize price risk. Copyright © 1999 John Wiley & Sons, Ltd.

Suggested Citation

  • C. W. Morgan & A. J. Rayner & C. Vaillant, 1999. "Agricultural futures markets in LDCs: a policy response to price volatility?," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(6), pages 893-910.
    • Handle: RePEc:wly:jintdv:v:11:y:1999:i:6:p:893-910
    DOI: 10.1002/(SICI)1099-1328(199909/10)11:6<893::AID-JID634>3.0.CO;2-P
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    References listed on IDEAS

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    Cited by:

    1. Randall Fortenbery, 2004. "Developed speculation and underdeveloped markets--the role of futures trading on export prices in less developed countries," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 31(4), pages 451-471, December.
    2. Sushil Mohan, 2007. "Market-Based Price-Risk Management for Coffee Producers," Dundee Discussion Papers in Economics 199, Economic Studies, University of Dundee.
    3. Bohl, Martin T. & Gross, Christian & Souza, Waldemar, 2019. "The role of emerging economies in the global price formation process of commodities: Evidence from Brazilian and U.S. coffee markets," International Review of Economics & Finance, Elsevier, vol. 60(C), pages 203-215.
    4. Karlan, Dean & Kutsoati, Ed & McMillan, Margaret & Udry, Chris, 2010. "Crop price indemnified loans for farmers," IFPRI discussion papers 1021, International Food Policy Research Institute (IFPRI).
    5. Akiyama, Takamasa & Baffes, John & Larson, Donald F. & Varangis, Panos, 2003. "Commodity market reform in Africa: some recent experience," Economic Systems, Elsevier, vol. 27(1), pages 83-115, March.
    6. Zhige Wu & Alex Maynard & Alfons Weersink & Getu Hailu, 2018. "Asymmetric spot‐futures price adjustments in grain markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(12), pages 1549-1564, December.
    7. Benedicto Lukanima & Raymond Swaray, 2014. "Market Reforms and Commodity Price Volatility: The Case of East African Coffee Market," The World Economy, Wiley Blackwell, vol. 37(8), pages 1152-1185, August.
    8. Thomas Barré, 2010. "Overemployment, Underemployment and the opportunity cost of time," Working Papers halshs-00452809, HAL.
    9. John M. Fry & Baoying Lai & Mark Rhodes, 2011. "The interdependence of Coffee spot and futures market," Working Papers 2011.1, International Network for Economic Research - INFER.
    10. C. W. Morgan, 2001. "Commodity futures markets in LDCs: a review and prospects," Progress in Development Studies, , vol. 1(2), pages 139-150, April.

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