Financialization and Global Commodity Chains: Distributional Implications for Cotton in Sub-Saharan Africa

Staritz, Cornelia; Newman, Susan; Tr�ster, Bernhard; Plank, Leonhard

Abstract

© 2018 International Institute of Social Studies Restructuring of global and local markets has led to an increased influence of commodity derivatives markets on commodity price setting. This has critical implications for price risks experienced by actors along commodity chains. Commodity derivatives markets have undergone significant changes that have been referred to as the ‘financialization of commodities’, which we define as an increase in trading activity by financial investors and the reorientation of business strategies by commodity trading houses towards risk management and financial activities. This article assesses how these global financialization processes affect commodity producers in low-income countries via the operational dynamics of global commodity chains and national market structures. It investigates how prices are set and transmitted and how risks are distributed and managed in the cotton sectors in Burkina Faso, Mozambique and Tanzania. It concludes that uneven exposure to price instability and access to price risk management have important distributional implications. Whilst international traders have the capacity to deal with price risks through hedging, in addition to expanding their profit possibilities through financial activities on derivatives markets, local actors in producing countries face the challenge of increased short-termism — albeit to different extents depending on national market structures — with limited access to risk management.

• Journal Article Type: Article
• Acceptance Date: May 31, 2017
• Publication Date: May 1, 2018
• Deposit Date: Jul 18, 2017
• Publicly Available Date: May 2, 2020
• Journal: Development and Change
• Print ISSN: 0012-155X
• Electronic ISSN: 1467-7660
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 49
• Issue: 3
• Pages: 815-842
• DOI: https://doi.org/10.1111/dech.12401
• Keywords: commodity markets, financialization, global commodity chains, commodity prices, price risks, price risk management, cotton sector, Africa
• Public URL: https://uwe-repository.worktribe.com/output/870741
• Publisher URL: https://doi.org/10.1111/dech.12401
• Additional Information: Additional Information : This is the peer reviewed version of the following article: Staritz, C., Newman, S., Tröster, B. and Plank, L. (2018) Financialization and global commodity chains: Distributional implications for cotton in Sub-Saharan Africa. Development and Change, which has been published in final form at https://doi.org/10.1111/dech.12401. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving
• Contract Date: Jul 18, 2017