The World Bank’s Approach to Increasing the Vulnerability of Small Coffee Producers
Posted: 18 Apr 2010
Date Written: April 16, 2010
Abstract
This essay critically engages the World Bank’s recent experiments in providing market-based price risk management for coffee farmers. Using the case of Mexico and the recent 1998–2002 coffee crisis, I argue that such advocacy of farm-level use of derivatives markets entails large direct and indirect costs for coffee farmer well-being.
This is especially so for smallholders. Not only might hedging with derivatives further de-stabilise and reduce producer incomes, but the opportunity cost of the Bank’s advocacy, in terms of foregone risk management alternatives, is also problematic. I conclude with a discussion of several risk management alternatives that may better support small coffee producers facing volatile commodity prices.
Keywords: coffee, agriculture, World Bank, development, derivatives, risk
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