Agric. Econ. - Czech, 2021, 67(1):33-40 | DOI: 10.17221/373/2020-AGRICECON

Creating a market for price swaps: Case study of an innovative risk management instrument in the Belgian-Dutch pear marketCase Study

Eewoud Lievens ORCID...*, Kobe Tielens, Erik Mathijs ORCID...
Department of Earth and Environmental Sciences, KU Leuven, Leuven, Belgium

While the benefits of using futures to manage price risk are widely recognised, only certain groups of farmers have suitable futures at their disposal. This paper discusses an innovative instrument, developed in the Belgian-Dutch pear market, that provides an alternative to futures markets by creating a market for price swaps. Thus, the instrument provides some benefits of market-traded derivatives (like futures) while remaining a relatively simple instrument, which requires fewer market transactions. The paper describes key properties of the swap contracts and the platform used to trade them. In addition, it compares the conditions required for establishing price swap markets and futures markets. Thus, our study informs the design of similar risk management instruments for commodities and contexts where futures are absent.

Keywords: collective action; financial derivatives; fruit; risk management

Published: January 29, 2021  Show citation

ACS AIP APA ASA Harvard Chicago Chicago Notes IEEE ISO690 MLA NLM Turabian Vancouver
Lievens E, Tielens K, Mathijs E. Creating a market for price swaps: Case study of an innovative risk management instrument in the Belgian-Dutch pear market. Agric. Econ. - Czech. 2021;67(1):33-40. doi: 10.17221/373/2020-AGRICECON.
Share...
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Adämmer P., Bohl M.T., Gross C. (2016): Price discovery in thinly traded futures markets: How thin is too thin? Journal of Futures Markets, 36: 851-869. Go to original source...
    2. Anastassiadis F., Feil J.-H., Musshoff O., Schilling P. (2014): Analysing farmers' use of price hedging instruments: An experimental approach. Journal of Agricultural & Food Industrial Organization, 12: 181-192. Go to original source...
    3. FreshPlaza (2019): Belgian fruit growers unite in Actiegroep Fruittelers. FreshPlaza. Available at https://www.freshplaza.com/article/9105609/belgian-fruit-growers-unite-inactiegroep-fruittelers/
    4. Bergfjord O.J. (2007): Is there a future for salmon futures? An analysis of the prospects of a potential futures market for salmon. Aquaculture Economics & Management, 11: 113-132. Go to original source...
    5. Bijman J., Hendrikse G. (2003): Cooperatives in chains: Institutional restructuring in the Dutch fruit and vegetable industry. Journal on Chain and Network Science, 3: 95-107. Go to original source...
    6. CBS (2020): Agriculture; crops, animals, and land use per region (Landbouw; gewassen, dieren en landgebruik naar regio). Available at https://opendata.cbs.nl/statline/#/CBS/nl/dataset/84499NED/table?ts=1609759627360 (accessed January 4, 2021) (in Dutch)
    7. Cordier J. (2018): Market incompleteness. The benefits of OTC contracts derived or not from futures markets. Meeting of the Expert Group on Agricultural Commodity Derivatives and Spot Markets. Available at https://ec.europa.eu/assets/agri/market-sectors/cereals/commodity-expert-group/2018-04-18/benefits_otc.pdf
    8. Kang M.G., Mahajan N. (2006): An introduction to marketbased instruments for agricultural price risk management. Food and Agriculture Organization of the United Nations.
    9. Michels M., Möllmann J., Musshoff O. (2019): Understanding the intention to use commodity futures contracts. Agricultural Finance Review, 79: 582-597. Go to original source...
    10. Pennings J.M.E., Egelkraut T.M. (2003): Research in agricultural futures markets: Integrating the finance and marketing approach (Forschung im Warenterminhandel: Integration von Finanz-und Marketingansatz). Agrarwirtschaft, 6: 300-308. (in German)
    11. Pennings J.M.E., Leuthold R.M. (1999): Commodity futures contract viability: A multidisciplinary approach. Office for Futures and Options Research (OFOR). Working Paper No. 99-02. Go to original source...
    12. Vilt (2017): SWAP contract between Ter Beke and PTC's is a scoop (SWAP-contract tussen Ter Beke en PTC's is Available at https://www.vilt.be/swap-contract-tussen-terbeke-en-ptcs-is-een-primeur (in Dutch)
    13. Vilt (2019): Pear sector unites in action group (Perensector verenigt zich in actiegroep). Vlaams Infocentrum Land - En Tuinbouw. Available at https://www.vilt.be/perensector-verenigt-zich-in-actiegroep (in Dutch)
    14. Saha A., Stroud J. (1994): A household model of on-farm storage under price risk. American Journal of Agricultural Economics, 76: 522-534. Go to original source...
    15. Siqueira K.B., da Silva C.A.B., Aguiar D.R.D. (2008): Viability of introducing milk futures contracts in Brazil: A multiple criteria decision analysis. Agribusiness, 24: 491-509. Go to original source...
    16. Statbel (2020a): Farm and Horticultural Holdings. [Dataset]. Brussels, Statistics Belgium. Available at https://statbel.fgov.be/en/themes/agriculture-fishery/farm-and-horticultural-holdings#figures (accessed July 9, 2020).
    17. Statbel (2020b): Agricultural Prices. [Dataset]. Brussels, Statistics Belgium. Available at https://statbel.fgov.be/en/themes/agriculture-fishery/agricultural-prices (accessed July 10, 2020).
    18. Taušer J., Čajka R. (2014): Hedging techniques in commodity risk management. Agricultural Economics - Czech, 60: 174-182. Go to original source...
    19. Veerman C., Valverde Cabrero E., Babuchowski A., Bedier J., Calzolari G., Dobbin D., Fresco L. O., Giesen H., Iwanson T., Juhasz A., Paumier A.L., Sarmír I. (2016): Improving market outcomes: Enhancing the position of farmers in the supply chain. Report of the Agricultural Markets Task Force. Available at https://ec.europa.eu/info/food-farming-fisheries/keypolicies/common-agricultural-policy/market-measures/agri-food-supply-chain/agricultural-markets-task-force_en
    20. WAPA (2020): Apple and Pear Exports by Country and Year (2003-2014), Based on UN COMTRADE data. [Dataset]. Brussels, World Apple and Pear Association. Available at http://www.wapa-association.org/asp/page_1.asp?doc_ id=446 (accessed July 10, 2020).
    21. Ziegelbäck M., Kastner G. (2013): Arbitrage hedging in markets for the US lean hogs and the EU live pigs. Agricultural Economics - Czech, 59: 505-511. Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International (CC BY NC 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content