Indexed Pricing: Sugarcane Price Guarantees in Colonial Taiwan, 1930–1940

In: The journal of economic history, Volume 59, Issue 4, p. 912-926

Abstract

In Taiwan during the Japanese colonial period, sugarcane was typically purchased by Japanese-owned sugar mills at prices guaranteed long in advance of delivery. In some places, the future price was indexed to the price of rice in the following year. This study points out that indexing served to insure farmers' real incomes. But as an insurance against an aggregate risk, this arrangement threatened the mill's profits. We investigate why mills nevertheless offered the insurance.