Does price volatility matter? An assessment along EU food chains

Agricultural prices in European food markets have become substantially more volatile over the past decade thereby exposing agribusinesses to risk and uncertainty. How food chain actors perceive and manage the risk from price volatility remained unexplored so far. We interviewed farmers, wholesalers, processors and retailers in six European food supply chains on their price volatility perceptions and management strategies. Contrary to common belief, findings show that price volatility matters not only to farmers but to all food chain actors. Actors perceive a more than 15% deviation of prices from their expected levels as price volatility. We further show that three factors determine whether price volatility is perceived as risky: the persistence, the reason and the direction of price deviations. Price volatility management strategies in EU food chains are very diverse and well beyond futures and forward contracts. The scope for policy interventions is identified based on strategy gaps identified in the chains.