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Price risk management instruments in agricultural and other unstable markets


  • Jean-Marc Boussard

    (INRA - MONA Paris, France)


Most economists congregate on the idea that commodity price instability should be reduced. Since at least one century a variety of instruments have been designed to that end, without much success, especially for agricultural commodities. The failure might be a consequence of the fact that most policies have neglected the reason for price fluctuations. Commodity price fluctuations are endogenous, caused by the market equilibrium local dynamic instability. It means that any measure relying on the “law of large numbers” is likely to be inoperative. In addition, because, in agriculture, the production function is homogenous and of degree one, any effective stabilisation leads to over production. Only production quotas can cope with these difficulties. They may be designed in such a way as to maintain the essential feature of market equilibrium, i.e. marginal cost equating price.

Suggested Citation

  • Jean-Marc Boussard, 2005. "Price risk management instruments in agricultural and other unstable markets," Risk and Insurance 0505001, EconWPA.
  • Handle: RePEc:wpa:wuwpri:0505001
    Note: Type of Document - pdf; pages: 10. Discussion paper

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    References listed on IDEAS

    1. Aleksander Janicki & Aleksander Weron, 1994. "Simulation and Chaotic Behavior of Alpha-stable Stochastic Processes," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook9401, June.
    2. Burnecki, Krzysztof & Misiorek, Adam & Weron, Rafal, 2010. "Loss Distributions," MPRA Paper 22163, University Library of Munich, Germany.
    3. Pavel Cizek & Wolfgang Karl Härdle & Rafal Weron, 2005. "Statistical Tools for Finance and Insurance," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook0501, June.
    4. Härdle, Wolfgang Karl & Burnecki, Krzysztof & Weron, Rafał, 2004. "Simulation of risk processes," Papers 2004,01, Humboldt University of Berlin, Center for Applied Statistics and Economics (CASE).
    5. Krzysztof Burnecki & Wolfgang Hardle & Rafal Weron, 2003. "An introduction to simulation of risk processes," HSC Research Reports HSC/03/04, Hugo Steinhaus Center, Wroclaw University of Technology.
    6. Burnecki, Krzysztof & Kukla, Grzegorz & Weron, Rafał, 2000. "Property insurance loss distributions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 287(1), pages 269-278.
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    Cited by:

    1. Sophie Mitra & Jean-Marc Boussard, 2008. "Storage and the Volatility of Agricultural Prices: A Model of Endogenous Fluctuations," Fordham Economics Discussion Paper Series dp2008-11, Fordham University, Department of Economics.
    2. Yankou Diasso, 2014. "Dynamique du prix international du coton : aléas, aversion au risque et chaos," Recherches économiques de Louvain, De Boeck Université, vol. 80(4), pages 53-86.
    3. Boussard, Jean-Marc, 2007. "The future of the European Common Agricultural Policy : a new philosopy ?," Miscellaneous Papers 44423, Agecon Search.

    More about this item


    Crop insurance agriculture commodity price stabilisation;

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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