All ACP Agricultural Commodities Programme Food and Agriculture Organization of the United Nations Agricultural producer risk management in a value chain context: Implications for developing countries’ agriculture

..................................................................................................................................... 4 Introduction ................................................................................................................................ 5 1. The current literature on agricultural value chain and the lack of attention to the welfare implications of risk................................................................................................. 7 2. Risk and risk management in the context of agricultural based value chains................... 10 2.1. Identification of the agents: personal vs. functional incidence analysis.................... 10 2.2. The nature of the links. Market vs. contractual relationships.................................... 10 2.3. The “fundamentals” of risk........................................................................................ 12 2.4. Elements for a coherent risk management strategy ................................................... 15 2.4.1. Risk assessment..................................................................................................... 15 2.4.2. Risk management .................................................................................................. 16 2.4.3. Price risk reduction. Affecting price distribution through production, storage and marketing decisions............................................................................ 17 2.4.4. Hedging price variation ......................................................................................... 20 2.4.5. Coping with price variation................................................................................... 21 2.5. A few summary considerations on price risk management within commodity chains and the role of contracts ................................................................................. 22 2.6. The role of governments............................................................................................ 23 3. Economic risk and types of value chains in developing Countries’ agriculture ............... 25 3.1. Staple foods for domestic consumption..................................................................... 28 3.2. Fresh fruits and vegetables for domestic consumption ............................................. 31 3.3. Highly standardized, high-volume internationally traded commodities ................... 32 3.4. Specialty commodities for international markets ...................................................... 36 3.5. Fresh fruits, vegetables and flowers for international markets.................................. 38 4. Conclusions ....................................................................................................................... 40 References ................................................................................................................................ 43