Market-based approaches for governments of food-importing countries to manage food security risks

Though well-established in the commercial sector, the use of market-based risk management is not widespread in the public sector, particularly by governments. Recent volatility in food and in energy prices has awakened governments' interest in learning more about how to use these tools, and some countries are beginning to experiment with them. Although it is clear that food price shocks are problematic, many countries have only a partial understanding of the specific exposure to commodity price risk; details about exactly how and where it affects the national budget are critical. To implement the use of market-based tools, it is important to identifying trade-offs between expected cost and risk, and to ensure that there is a strong institutional framework in place to support the strategy.