Commodity risk

• Price risk is arising out of adverse movements in the world prices, exchange rates, basis between local and world prices. The related price area risk usually has a rather minor impact.
• Quantity or volume risk
• Cost risk
• Political risk

  Groups at risk

• Producers face price risk, cost risk and quantity risk
• Buyers face price risk between the time of up-country purchase buying and sale, typically at the port, to an exporter.
• Exporters face the same risk between purchase at the port and sale in the destination market; and may also face political risks with regard to export licenses or foreign exchange conversion.
• Governments face price and quantity risk with regard to tax revenues, particularly where tax rates rise as commodity prices rise or if support or other payments depend on the level of commodity prices.