Managing Agriculture Risk through Commodity Exchanges: An opportunity for Zimbabwe and other emerging economies

Zimbabwe is an agro-ecological area and its economy is backed by agriculture. Managing agricultural activities is important as this will impact positively on the country’s gross domestic product (GDP). There are risks associated with agricultural risks such as production and marketing. Tobacco farmers in particular are losing millions of dollars from contractors, buyers and microfinance companies who would have loaned them some monies for inputs among others. The same applies to animal farmers as they lost animals due to various diseases, drought as a result climate change. Animal and crop productivity in Zimbabwe is being affected by prolonged dry spells, pests and diseases. For farmers, there is need for fair pricing models considering risks in agriculture. The aim of the paper is to assess the adoption of mathematical methods and derivative markets by farmers and investors in agricultural products. A situational analysis on the adoption derivative markets by farmers, invetors and agricultural stakeholders among others in Zimbabwe was done. Random sampling methods was used in selecting respondents in Zimbabwe. From the survey, it was noted that most of the farmers, investors and stakeholders are not using mathematical models or derivative markets in their pricing and contracting decisions. The study recommends that the government in partnership with the Ministry of Agriculture should train or sensatise people on the benefits of agriculture derivative markets.