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International prices for soft commodities are known for their volatility, which is an important concern on both a macro and micro scale. Price fluctuations for soft commodities can destabilise real exchange rates and can cause difficulties for the governments of emerging market countries in facilitating the reduction of poverty and preserve a stable economic environment. On a micro scale, we are primarily concerned about the effect of price uncertainty on the operations of producers and traders in commodities. Volatility often leads to inefficiency and impairs the efficient allocation of resources for farmers. The higher and more unpredictable the price volatility of a commodity, the greater the possibility of incurring losses or realising gains on future sales or purchases of that commodity. Moreover, the uncertainty reduces the opportunities to access credit markets and can drive farmers and producers to utilise low risk production techniques and technologies, lowering incomes and no loan amortization calculator t helping economic growth and poverty alleviation. In the past, governments of emerging market countries have responded to such uncertainties by large scale market intervention, often initiated by state enterprises such as agricultural marketing boards, and usually insulating farmers from world price shocks. However, in recent years there has been an acknowledgment that such market interventions have adverse effects. Since the global trend is towards liberalisation, protectionism which favours inefficient operators is no longer encouraged. On the other hand, liberalisation policies tend to shift the risk of price uncertainty back from governments to producers. In the face of international market fluctuations, there is a clear need for risk management mechanisms to allow producers to manage risk in the transition to a market driven commodity sector. With liberalisation, producers have become major players in the market place and more responsive to international market conditions.