Risk management in the cooperative contract

Abstract

Agricultural marketing cooperatives are important in risk management, but the typical cooperative does a much better job of helping their members manage some sorts of risk than it does others. In particular, co-ops are good at reducing marketing risk, or idiosyncratic variation in prices observed within the course of a single season. However, co-ops are not good at helping to manage production risk, which involves variation in yield over the course of several years. This paper argues that by incorporating a function of history, the coop could also provide a useful (though limited) form of insurance against production risk.
Citation

Ligon, E.  "Risk management in the cooperative contract" Ferdi, Policy brief B35, August 2011