Improving Agricultural Productivity in Brazil: The Unmet Potential of Price Risk Policy

The research evaluates the gap between the potential economic benefit of price risk hedging and the actual value delivered by Brazil's Minimum Price Guarantee Policy (PGPM). Using a neoclassical growth model for soybean, sugarcane, corn, and coffee, the authors find that farmers would value full price insurance at BRL 49.6 billion (25.9% of total production value), while the current policy provides only BRL 3.982 billion in value, representing just 8.0% of the potential market. The study argues that the PGPM is an inefficient, anachronistic tool that focuses on preventing extreme poverty rather than managing the price volatility that affects both small and large-scale commercial agribusiness. It recommends shifting toward market-oriented instruments, such as direct payments or revenue insurance, similar to transitions made in the United States and European Union.

• The total economic value that farmers of soybean, sugarcane, corn, and coffee would place on price risk mitigation is BRL 49.6 billion, which represents 25.9% of the total production value for these four crops.
• Brazil's current price risk policy is largely ineffective, capturing only 8.0% of the potential insurance market value, totaling BRL 3.982 billion for the four analyzed crops.
• Price risk insurance provides greater relative benefits to small farmers because their output is closer to minimum consumption needs, making them more vulnerable to falling below the poverty line.
• The current Minimum Price Guarantee Policy (PGPM) is considered cost-ineffective and market-distorting because it relies on government buyouts and storage, which can destroy economic value.
• The PGPM is anachronistic as it was designed in the 1960s to alleviate rural poverty, whereas modern Brazilian agriculture is dominated by large-scale commercial agribusiness that requires protection against volatility rather than just subsistence floors.
• Brazilian capital markets for agricultural hedging are underdeveloped compared to global standards; for instance, the BM&FBovespa had an average daily volume of fewer than 9,000 contracts in 2013, while the CME Group saw over 1 million.

APA

Assunção, J., Gandour, C., & Hemsley, P. (2015). Improving Agricultural Productivity in Brazil: The Unmet Potential of Price Risk Policy. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/02/Improving-Agricultural-Productivity-in-Brazil-The-Unmet-Potential-of-Price-Risk-Policy-Technical-Paper.pdf

Chicago

Assunção, Juliano, Clarissa Gandour, and Pedro Hemsley. Improving Agricultural Productivity in Brazil: The Unmet Potential of Price Risk Policy. Climate Policy Initiative, 2015. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/02/Improving-Agricultural-Productivity-in-Brazil-The-Unmet-Potential-of-Price-Risk-Policy-Technical-Paper.pdf.

Wikipedia

{{cite report |last1=Assunção |first1=Juliano |last2=Gandour |first2=Clarissa |last3=Hemsley |first3=Pedro |title=Improving Agricultural Productivity in Brazil: The Unmet Potential of Price Risk Policy |publisher=Climate Policy Initiative |date=29 January 2015 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2015/02/Improving-Agricultural-Productivity-in-Brazil-The-Unmet-Potential-of-Price-Risk-Policy-Technical-Paper.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{assuno2015improving, author = {Assunção, Juliano and Gandour, Clarissa and Hemsley, Pedro}, title = {{Improving Agricultural Productivity in Brazil: The Unmet Potential of Price Risk Policy}}, institution = {Climate Policy Initiative}, year = {2015}, month = jan, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2015/02/Improving-Agricultural-Productivity-in-Brazil-The-Unmet-Potential-of-Price-Risk-Policy-Technical-Paper.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }