Producer price volatility in the German fruit and vegetable industry

Price volatility belongs to the most important sources of risk in fruit and vegetable production. Competitive pressure is continuously increasing due to globalization (Lange, 2009) and concentration trends in retail (Flenker et al., 2009). In addition, political risks, like Russia’s ban on fruits and vegetables produced in the European Union, and food crises (e.g., E. coli outbreak in 2011) are discussed as possible reasons for increasing producer price volatility. Seasonality of many fruits and vegetables is further amplifying the issue. Also, perishability constrains the possibility to store fruits and vegetables, and leads to volatile markets (Cook, 2011). Furthermore, limited availability of price hedging instruments (Hartwich and Gandorfer, 2014; Hartwich et al., 2015) challenges price risk management. For instance, commodity futures contracts do not exist due to the perishability and limited storage capability of most fresh produce (see Manfredo and Libbin, 1998). The only horticultural products traded at commodity exchanges are orange juice, cacao, and coffee (www.theice.com). A commodity exchange is a market in which standardized (quantity, quality, and price) futures contracts are traded to hedge price risk (see OECD, 2009). Therefore, the choice of the marketing channel is one of the most important options available to fruit and vegetable Summary