10 futures markets. Unfortunately, price risk management tools such as futures marketbased instruments can require prohibitively large volumes, entail high transaction costs and certainly require a specialized level of expertise. As such, the single most important limitation to recent commodity risk policies is the lack of organization among producers (Dehn, Gilbert, and Varangis 2003;Gilbert 2003). This is, in fact, a recurring limitation to the application of the ‘new’ commodity policies. In the case of price volatility strategies, this limitation is confirmed by test cases conducted by the World Bank: Technical assistance and training are cited as one of the basic prerequisites for the effective implementation of the new price risk management policies, but providing these to producer organizations can be prohibitively time consuming and costly (Varangis and Lewin 2003b).

In terms of the downward trend in coffee prices, commodity policy came to rely largely on market-based measures and interventions that aim to raise the returns to coffee through improved profitability and competitiveness (Varangis _, et al._ 2003c, p.26) or to diversify those who can no longer participate in the coffee market. Policy measures aim either to increase returns to producers through the earning of premiums (profitability) or through the reduction of production and transaction costs (competitiveness). First, the measures for adding value through premium earnings include: improving the quality of coffee to access specialty niche markets such as the gourmet and organic markets, and improving the marketing, reputation and brand management of different origins (IADB, The World Bank, and USAID 2002). The improvement of quality as a major policy initiative can also be seen in the ICO’s Coffee Quality-Improvement Program, which establishes minimum quality standards for both Arabica and Robusta. In addition to improving returns, quality improvement has also been shown to stimulate domestic coffee consumption and thereby boost demand (see the example of Brazil in Varangis _, et al._ 2003c). Second, competitiveness is encouraged through policies aimed at cost reduction, primarily through productivity advances and the reduction of transaction costs through more direct trade. More direct trading relations, however, again require greater organizational development of producers in order to permit more direct access to retailers and traders. Third, in acknowledgment that some producers will not be able to achieve greater competitiveness or access higher quality/higher profitability niches of the market, a related strand of policy focuses on diversification efforts from the coffee activity. The role for government in assisting diversification strategies is here identified: market research, technical assistance, improving labor mobility and providing credit support would assist the effective implementation of diversification policy. Finally, institutional reform is recommended for the provision of ‘safety nets’ for poor producers and, importantly, coffee laborers (Varangis _, et al._ 2003c).

# _Commodity Policy and Fairtrade_

There are three important limiting factors to the new wave of commodity policy, particularly as it pertains to coffee. First, with respect to increasing the returns to producers through a reduction in costs (as opposed to price support) it does not provide any insight on what the scope for these gains might be. Many coffee producing countries (e.g. Brazil and Costa Rica) are already highly mechanized and/or have seen important productivity gains with agro-chemical and technology packages. It is not clear where further gains are to be had.