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The World Bank’s approach to increasing the vulnerability of small coffee producers

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  • Sasha C. Breger Bush
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    Abstract

    This paper critically engages the World Bank’s recent experiments in providing marketbased 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 wellbeing. This is especially so for smallholders. Not only might hedging with derivatives further destabilise 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.

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    File URL: http://www.bwpi.manchester.ac.uk/medialibrary/publications/working_papers/bwpi-wp-11310.pdf
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    Paper provided by BWPI, The University of Manchester in its series Brooks World Poverty Institute Working Paper Series with number 11310.

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    Date of creation: 2010
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    Handle: RePEc:bwp:bwppap:11310

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    1. Morduch, Jonathan, 1999. "Between the State and the Market: Can Informal Insurance Patch the Safety Net?," World Bank Research Observer, World Bank Group, vol. 14(2), pages 187-207, August.
    2. Bussolo, Maurizio & Godart, Olivier & Lay, Jann & Thiele, Rainer, 2006. "The impact of commodity price changes on rural households : the case of coffee in Uganda," Policy Research Working Paper Series 4088, The World Bank.
    3. Takamasa Akiyama & John Baffes & Donald Larson & Panos Varangis, 2001. "Commodity Market Reforms : Lessons of Two Decades," World Bank Publications, The World Bank, number 13852.
    4. Lence, Sergio H., 2008. "Do Futures Benefit Farmers?," Staff General Research Papers 12919, Iowa State University, Department of Economics.
    5. Bohman, Mary & Jarvis, Lovell & Barichello, Richard, 1996. "Rent Seeking and International Commodity Agreements: The Case of Coffee," Economic Development and Cultural Change, University of Chicago Press, vol. 44(2), pages 379-404, January.
    6. Anderson, Ronald W & Danthine, Jean-Pierre, 1983. "The Time Pattern of Hedging and the Volatility of Futures Prices," Review of Economic Studies, Wiley Blackwell, vol. 50(2), pages 249-66, April.
    7. Robert H. Bates, 1998. "Open-Economy Politics: The Political Economy of the World Coffee Trade," Economics Books, Princeton University Press, edition 1, volume 1, number 6067.
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