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

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Author Info
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.

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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 11 (1999)
Issue (Month): 6 ()
Pages: 893-910
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:wly:jintdv:v:11:y:1999:i:6:p:893-910

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  1. C. Vaillant, & C. W. Morgan, A. J. Rayner & T. A. Lloyd,, . "Futures Markets for Agricultural Commodities in Developing Countries," Discussion Papers 97/1, University of Nottingham, CREDIT.
  2. STEVEN C. BLANK & COLIN A. CARTER & JEFFREY McDONALD, 1997. "Is The Market Failing Agricultural Producers Who Wish To Manage Risks?," Contemporary Economic Policy, Western Economic Association International, vol. 15(3), pages 103-112, 07. [Downloadable!] (restricted)
  3. Maizels, Alfred, 1994. "The continuing commodity crisis of developing countries," World Development, Elsevier, vol. 22(11), pages 1685-1695, November. [Downloadable!] (restricted)
  4. Deaton, Angus & Laroque, Guy, 1992. "On the Behaviour of Commodity Prices," Review of Economic Studies, Blackwell Publishing, vol. 59(1), pages 1-23, January. [Downloadable!] (restricted)
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  5. Gilbert, Christopher L, 1985. "Futures Trading and the Welfare Evaluation of Commodity Price Stabilisation," Economic Journal, Royal Economic Society, vol. 95(379), pages 637-61, September. [Downloadable!] (restricted)
  6. Varangis, Panos & Larson, Don, 1996. "Dealing with commodity price uncertainty," Policy Research Working Paper Series 1667, The World Bank. [Downloadable!]
  7. Varangis, Panos & Thigpen, Elton & Satyanarayan, Sudhakar & DEC, 1994. "The use of New York cotton futures contracts to hedge cotton price risk in developing countries," Policy Research Working Paper Series 1328, The World Bank. [Downloadable!]
  8. Gilbert, Christopher L., 1996. "International Commodity Agreements: An obituary notice," World Development, Elsevier, vol. 24(1), pages 1-19, January. [Downloadable!] (restricted)
  9. Bleaney, Michael & Greenaway, David, 1993. "Adjustment to external imbalance and investment slumps in developing countries," European Economic Review, Elsevier, vol. 37(2-3), pages 577-585, April. [Downloadable!] (restricted)
  10. Reinhart, Carmen & Wickham, Peter, 1994. "Commodity Prices: Cyclical Weakness or Secular Decline?," MPRA Paper 8173, University Library of Munich, Germany. [Downloadable!]
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  11. Rolfo, Jacques, 1980. "Optimal Hedging under Price and Quantity Uncertainty: The Case of a Cocoa Producer," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 100-116, February. [Downloadable!] (restricted)
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