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

Staritz, Cornelia; Newman, Susan; Tröster, Bernhard; Plank, Leonhard

Authors

Cornelia Staritz

Susan Newman Susan3.Newman@uwe.ac.uk
Associate Professor in Economics

Bernhard Tröster

Leonhard Plank



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
Publication Date May 1, 2018
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
APA6 Citation Staritz, C., Newman, S., Tröster, B., & Plank, L. (2018). Financialization and Global Commodity Chains: Distributional Implications for Cotton in Sub-Saharan Africa. Development and Change, 49(3), 815-842. https://doi.org/10.1111/dech.12401
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
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

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