In 1989 the economic clause in the coffee agreement was suspended and it was not renewed in 1994. What this meant was the removal of the national coffee boards from the bar­gaining and, therefore, from the price equation and its sub­stitution by a buyer-driven commodity chain (Gibbon and Ponte, 2005).
     With the rise of the Washington Consensus there has been a shift of emphasis. In the first place there is an empha­sis on respecting "market fundamentals", rather than deal­ing with market failure. Second and perhaps following from the first, the search is not for schemes to stabilize prices, not to reduce volatility, but to reduce uncertainty with regard to volatility. Third, the attempt is to develop market-based in­struments, futures and insurance systems to help producers deal with price risk. It is expected that the development of such market-based systems will allow for announcement of harvest prices, which would enable producers to plan their investments.
     The proposed system is an elaborate market-based sys­tem of futures swaps, options and derivatives. These have worked in the US and Europe, where, for instance, livestock raising is done in large units. But even then it has been found that less than 10% of OECD producers use these instru­ments. Why is the proportion so low? It is possibly due to the fact that the producers actually depend on the high level of government subsidies, amounting to $19,000 per producer per annum (ITF, 1999). On top of that, they rely on tariff and non-tariff barriers to shield them from foreign competition. Further, the incomes of farm families are now mainly from non-farm sources. Finally, up to 40% of com­modity production is done on contract basis with the large buyers, rather than with any price hedging systems (Eco­nomic Times, Delhi, 6 Feb 2006).
     It is these measures, rather than the elaborate systems of market-based instruments that provide income security for farm households. These futures instruments are actually used by processing and marketing companies, which buy from producers and in turn pass on some of the benefits to producers. Finally all these market-based schemes link up to commodity markets in Chicago, New York, London and other financial centers. New large-scale commodity markets are coming up in China and India, but they are still at an early stage. In any case, they cannot substitute for price sta­bilization measures.
     Among developing countries, Mexico has tried to im­plement market-based insurance and futures schemes. India is in the process of developing the secondary markets for commodities, which already has a larger turn-over than the Mumbai stock market. The Mexican Agricultural Products Options Program (APOP) has large lots in which operations can be conducted. Corn farmers, who have been devastated by NAFTA-induced competition from subsidized US corn and are typically small farmers, operating less than one hect­are of land, have a very low participation in the APOP price insurance schemes. There is more participation in wheat and cotton, where production units are larger (ITF, 1999). The Mexican experience is certainly not very encouraging about the possibility of using such market-based insurance and fu­tures schemes.
     In trying to extend price insurance schemes to develop­ing there is thus one critical problem of small size of lots

in which production is undertaken. Unless farmers join to­gether in groups it will be impossible to participate in such insurance schemes. Collective action problems come in the way of such participation. But, it is important to overcome such collective action problems—in the increasingly buyer-driven commodity chains, small producers need to combine in order to strengthen their bargaining position.
     Countries like China or India, with large volumes of commodities traded on the market, could possibly set up futures markets and price insurance schemes. But in smaller countries there would not be scale for such institutions. In this there is a possible role for regional institutions. The commodity exchanges in India could serve all of South Asia. But then profits from the trade would also accrue to Indian institutions.
     Finally there is the need to compare price insurance mechanisms with price stabilization measures. The costs and benefits of the two would need to be compared. A cru­cial factor in the comparison is that while price stabilization would benefit all small producers, price insurance schemes would tend to exclude small producers from their ambit. If it is important not to exclude the poorest and smallest producers from the likely benefits, then price stabilization would certainly be superior to price insurance.
     In insurance schemes the cost would be directly borne by participating producers. This would be direct deduction from their incomes, to be passed on to those, generally far richer then themselves, who would profit from their abil­ity to take risks. On the other hand in price stabilization measures the costs would be borne, if done nationally, by taxpayers. If done internationally, the costs could even be borne, as Keynes had proposed, by the countries in surplus or rich countries. Given that the countries most dependent on commodities' export are among the poorest, there is a strong case for internationally-funded action. Should this burden be borne by taxpayers in the contributing countries or by consumers of the commodities? A tax on, for instance, consumption of coffee could be used to fund a buffer stock scheme for coffee. If taxes are to fund a buffer scheme for a commodity, it would certainly be appropriate that the costs be borne by those who consume that commodity. This would further directly relate consumers with producers, strengthening the moral connection between the two.
     What a buffer stock system should not do is to allo­cate quotas, whether between countries or within countries. There would inevitably be disputes about market shares. And, how would new countries be able to enter the market? The former Director-General of UNCTAD proposed export quotas, in which case, "... within each country, means would have to be found for distributing that country's quota among its domestic producers ..." (Corea, 1992). Experi­ence has shown that this increases the power of those who take these decisions, power which can be used to garner a portion of the income from the producers and also to favor one group or community against another. It is better to leave such decisions to individual produces operating in the mar­ket. As Keynes's scheme proposed if, when demand is less than supply and stocks pile up, there is a step-by-step reduc­tion in prices, then the higher cost producers are likely to exit from the field. Such a process would involve the market mechanism in fostering competition and thus efficient, low-