Both time and spatial price uncertainty poses challenges to all stakeholders in the agricultural sector. The challenges of a price move are often different depending on the stakeholders’ position in the supply chain (farmers, processors) or can affect demand for a seemingly non-related product (input suppliers) or can adversely affect the financial position of others (banks, traders, retailers, consumers). In addition, adverse price moves of agricultural commodity and input costs may put severe strains on a government’s fiscal position. The events of a number of periods of price uncertainty and movement (volatility) have caused companies to fall into bankruptcy, farmers to fall into semi-permanent poverty traps and consumers to face spiraling costs for food. This last category of problems has also caused governments to intervene in food markets to stem spiraling prices to quell civil unrest, linking prices intrinsically with the debate on national food security.
The Agriculture and Rural Development Department (ARD) provides assistance to clients to enable them to better identify their price risks and to thereby design and implement strategies that enable them to better manage them, be that through mitigation, transfer or coping with the price risks that they face. This is achieved through the use of both physical and financial strategies. To achieve this on a sustainable and institutionalized basis, ARD is engaged in developing the capacity of developing country clients (banks, commodity traders, farmer groups, processors, agribusiness companies and governments) in the use of these price risk management tools through the provision of training courses and individualized capacity transfer activities.