Managing Price Risk in Local Food Reserves
Analyzing the prospects for a stabilization fund in Mali and Niger
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Local food reserves can contribute to food security strategies and have the potential to empower communities.
These collective initiatives are set up and owned by small-scale producers with the objective of increasing the availability and access to food, or of increasing income by managing the food-price cycle. But the rate of failure among local food reserves is high, largely as a result of a combination of climate and price risks, coupled with challenges linked to their design, planning and management.
This research report analyzes the possibility of developing a stabilization fund as an effective price risk management tool to help local food reserves overcome their vulnerability to price cycle inversions. Four scenarios were considered and modelled on the basis of price data in a series of 12 cereal markets in Mali and Niger over a 15-year time span.
The report concludes that the type of stabilization fund outlined could represent a viable way of managing price risk in countries where the option of using market-based tools to tackle price risk is not available.