IS THE MARKET FAILING AGRICULTURAL PRODUCERS WHO WISH TO MANAGE RISKS

The variability of producers' net income levels is largely a function of variability in output price, yield and input prices. Pet, the tools available to manage price risk and yield risk are not widely used by producers. Is the market failing to provide agricultural producers wit h effective risk management tools? To identify producers' needs, the p aper establishes the relative importance of price and yield risk by de composing the variability of revenues from a sample of crops in Califo rnia agriculture. The risk tools available to producers of those commo dities are compared to producers' needs for tools. Results indicate th at ''market failure'' is readily apparent in markets for tools to mana ge risks. However the nature of these missing or incomplete markets do es not necessarily imply inefficiencies that would justify government intervention. (JEL D52, D80, W12).