One crucial aspect of efficient land use is agricultural risk management, which includes protecting farmers from adverse shocks, such as unfavorable weather and pests, and from price risk caused by volatility in output prices. The latter is currently a major concern for Brazilian farmers and policymakers — not only because unmanaged price risk can result in low income for farmers, and thereby affect productivity, but moreover because it can restrict farmers’ ability to raise credit, which can affect agricultural growth more broadly.
This study assesses some risk mitigation policies and finds that they are not meeting the large needs of the market. Current policy yields approximately BRL 4 billion in gains for farmers, which is equivalent to 8% of total production value. In contrast, this report finds that farmers would be willing to pay about BRL 50 billion (26% of total production value) to avoid price risk across the four crops that are commercially most relevant in Brazil — soybean, sugarcane, corn, and coffee.