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Hedging Maize Import Price Risks in Malawi

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Number of Pages
Wouter Zant
The World Bank

This case study describes the evolution of a program to hedge maize imports in Malawi using physical call options (i.e. options to buy physical maize and have it delivered to Malawi). The advantage of the physical call options over financial options in this application is that not only is price risk reduced but also the actual availability of maize product is ensured during times of domestic production shortage. An integral part of this study is the exploration of ways in which the use of instruments such as financial derivatives and call options may be embedded in existing food import marketing and financial arrangements.