Following this, the paper argues that whilst risk management markets are not a panacea for farmers’ problems – they do not exist and are never likely to exist for all commodities, and can only give temporary reprieve from a secular fall of prices – they could, nevertheless, greatly help developing country farmers to improve their lives. In addition, the paper points out that transfer of price risk is not the only facility that financial mechanisms and techniques can offer to farmers. Financial techniques can also be used to reduce farmers’ counterparty risk – to shift the risk of lending from the farmer (a credit risk) to the crop (a performance risk).

This paper looks at the practical applications of “new” financial techniques for enabling farmers to manage price risk and facilitating their access to credit. The first chapter provides an overview of farmers’ attitude towards risk, and the possible role of farmers’ associations in helping farmers cope with price risk and in facilitating agricultural financing. The next chapter describes various applications of financial techniques for price risk management and agricultural finance. The final chapter focuses on possibilities for farmers’ associations to enhance their use of these techniques, including through the use of modern communication and information technologies.