Kampala — Dutch bank Rabobank International is offering East African coffee farmers a chance to protect themselves from the worst effects of low world prices.

A 'commodity hedging tool' is effectively a form of insurance, bought to protect farmers against price falls. It is widely used on Western commodity exchanges.

A Ugandan business has already become the first to use this tool, a report found. The company bought a small volume of price insurance for three groups of producers in Ishaka, Uganda. It sold back the insurance when it was no longer required. This transaction benefited about 450 small Ugandan coffee farmers. Further transactions are expected during the crop season, which ends in February.

In Tanzania, Rabobank is working with a large coffee co-operative, which purchased price insurance to manage its risk for the 2002/03 Arabica coffee selling season in October, November and December.

In a recent project designed to protect producers who have no access to modern exchanges, Rabobank has been involved with several pilot transactions with the World Bank International Task Force in Commodity Price Risk Management.