Financialisation, price risks, and global commodity chains: Distributional implications on Cotton Sectors in Sub-Saharan Africa

Cornelia Staritz, Susan Newman, Bernhard Tröster and Leonhard Plank
Additional contact information
Cornelia Staritz: Austrian Foundation for Development Research (ÖFSE)
Susan Newman: University of the West of England & University of Johannesburg
Bernhard Tröster: Austrian Foundation for Development Research (ÖFSE)
Leonhard Plank: Vienna University of Technology

No 2015/04, Working Papers from Maastricht School of Management

Abstract: The functioning of commodity markets has changed related to processes of financialization that involve two major developments – the rise of financial interest on commodity derivative markets through the increasing presence of financial investors and the changing business models of international commodity trading houses and the increasing importance of these markets in price setting and risk management since the liberalization of national commodity sectors. A critical question is how these global financialization processes affect commodity producers in low income countries via the operational dynamics of global commodity chains and distinct national market structures. This paper investigates how global financialization processes influence 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 commodity derivative markets, local actors in producer countries face the challenge of price instability and increased short-termism – albeit to different extents deepening on local market structures – with limited access to risk management.

Keywords: commodity markets; financialization; global commodity chains; commodity prices; price risks; price risk management; cotton sector; Africa (search for similar items in EconPapers)
Pages: 31 pages
Date: 2015-09
New Economics Papers: this item is included in nep-afr and nep-agr
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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