A Portfolio Approach to Cooperative Price Risk Management
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Agricultural producers face significant price risk. For some products, farmers may
hedge this risk in well-functioning futures markets. For several products, however, no
such risk management instrument is readily available. We suggest that farmers reduce
price risk by organizing cooperatives where members diversify by creating "accounting"
portfolios. The approach is illustrated with data from the Dutch flower market, and
some practical problems connected to such cooperative risk pooling in agriculture are
addressed.