{"title":"The Financialization of Coffee, Cocoa and Cotton Value Chains: The Role of Physical Actors","authors":"Bernhard Tröster, Ulrich Gunter","doi":"10.1111/dech.12802","DOIUrl":null,"url":null,"abstract":"The prices of cash crops impact the livelihoods of millions of households in developing countries. While the influence of speculators on global commodity prices determined through derivatives exchanges is extensively discussed, the contribution of hedgers to short‐term changes in futures prices has largely been disregarded in the financialization of commodities discourse over the past two decades. This results in a failure to account for the interconnected activities of increasingly consolidated lead firms within physical global value chains (GVCs) and derivatives markets. This article examines the pricing and hedging strategies of lead firms in the coffee, cocoa and cotton GVCs in relation to their activities on commodity derivatives markets. Based on Open Interest data as an indicator of derivatives markets activity, a measure of buying and selling pressure by trader categories is applied in a Generalized ARCH (GARCH) model. The findings of this article show that hedgers’ activities allow speculators to drive global benchmark prices so that they can benefit through combinations of financial hedging and physical trading strategies. As these practices of lead firms contribute to the transmission of futures prices along GVCs, smallholders and other actors in cash crops in producer countries are exposed to heightened price changes.","PeriodicalId":48194,"journal":{"name":"Development and Change","volume":"1 1","pages":""},"PeriodicalIF":3.0000,"publicationDate":"2023-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Development and Change","FirstCategoryId":"90","ListUrlMain":"https://doi.org/10.1111/dech.12802","RegionNum":2,"RegionCategory":"社会学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"DEVELOPMENT STUDIES","Score":null,"Total":0}
引用次数: 0
Abstract
The prices of cash crops impact the livelihoods of millions of households in developing countries. While the influence of speculators on global commodity prices determined through derivatives exchanges is extensively discussed, the contribution of hedgers to short‐term changes in futures prices has largely been disregarded in the financialization of commodities discourse over the past two decades. This results in a failure to account for the interconnected activities of increasingly consolidated lead firms within physical global value chains (GVCs) and derivatives markets. This article examines the pricing and hedging strategies of lead firms in the coffee, cocoa and cotton GVCs in relation to their activities on commodity derivatives markets. Based on Open Interest data as an indicator of derivatives markets activity, a measure of buying and selling pressure by trader categories is applied in a Generalized ARCH (GARCH) model. The findings of this article show that hedgers’ activities allow speculators to drive global benchmark prices so that they can benefit through combinations of financial hedging and physical trading strategies. As these practices of lead firms contribute to the transmission of futures prices along GVCs, smallholders and other actors in cash crops in producer countries are exposed to heightened price changes.
期刊介绍:
Development and Change is essential reading for anyone interested in development studies and social change. It publishes articles from a wide range of authors, both well-established specialists and young scholars, and is an important resource for: - social science faculties and research institutions - international development agencies and NGOs - graduate teachers and researchers - all those with a serious interest in the dynamics of development, from reflective activists to analytical practitioners