Hedging to Safety: A Political Economy of Derivatives, Risk and Agriculture in the Developing World

<p>It has become common for researchers and international development institutions to recommend the use of derivative instruments to developing country farmers and policymakers as a means of insuring agricultural incomes against the threats posed by volatile global commodity prices. Despite such enthusiasm, very little research to date examines whether or not derivative instruments actually can deliver income support to agricultural producers who face commodity price risk. This dissertation evaluates these recommendations, focusing upon the potential income security benefits of hedging with futures instruments for coffee farmers in Mexico, Brazil and Uganda during the 1998-2002 coffee crisis. The three-part quantitative and qualitative analysis undertaken focuses upon: 1. The ability of futures hedging to address the income insecurity of coffee producers (with income security having four dimensions: certainty, stability, adequacy and (in)equality); 2. Difficulties accessing futures markets, especially among small producers, due to various obstacles such size, yield risk, cost, information and knowledge; and, 3. Policy innovations and alternatives that could enhance the services provided by futures markets, supplement, or replace them in the coffee context. The data suggest that futures hedging provides an ambiguous income security service that in some cases can improve farmer income security, while in other cases making farmer incomes more insecure. Further, no hedging strategy tested was able to address all four aspects of farmer income (in)security simultaneously, suggesting the need for policymakers to consider alternative commodity price risk management arrangements. The data additionally suggest that substantial portions of the coffee farming populations of the three case countries are systematically excluded from futures hedging due to the presence of severe obstacles to substantive participation. Alarmingly, many of the futures market intermediaries erected by development institutions and/or national policymakers in the three case countries also fail to include small coffee producers, and sometimes provide risk management services of dubious quality. The dissertation concludes with suggestions for cautious and limited application of futures instruments by governments to the problem of coffee farmer income insecurity, as well as suggestions about alternative arrangements that may be of greater income security assistance to small coffee producers.</p>

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Year dc:date.available

2009

Author dc:creator

• Breger Bush, Sasha Coler

Contributors dc:contributor

• Ilene Grabel, Ph.D.
• George DeMartino
• Martin Rhodes
• Randall Dodd

• Agriculture
• Coffee
• Derivaties
• Development
• Futures
• Risk
• Agricultural Economics
• Agriculture Law
• International Trade Law

Statement dc:rights

• <p>Copyright is held by the author. User is responsible for all copyright compliance.</p>

Language dc:language

en

Repository record dc:identifier

https://digitalcommons.du.edu/etd/768

OAI identifier oai:identifier

oai:digitalcommons.du.edu:etd-1767