Managing risk in the dairy sector:how futures markets could help

The aim of this market brief is toanalyse financial markets'instruments, such as futures and options, in the dairy sector.In a period characterised by relatively high volatility and low prices,these tools could help farmersand processorsin setting up sound hedging strategies. After presenting facts and figures on price volatility in the dairy sector, the brief explains how futures markets work (with examples)and illustrates what they can bring to operators. Itthen reviews futures markets currently available in the dairysectorin the EU, making a comparison withthe US and New Zealand and with futures on crops in theEU.Finally, the brief exploresthe obstacles which are causing the still rather limited useof futures and optionsin the dairy secto, highlighting explanatory factors and identifying key issues.

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