Financialization and Changes in the Social Relations along Commodity Chains: The Case of Coffee

Abstract

This article examines distributional implications of the restructuring of international coffee markets that has occurred since the collapse of the International Coffee Agreement in 1989 and market liberalization in coffee producing countries under structural adjustment programs. It is argued that increased financial investment on international commodity exchanges, together with market liberalization, have given rise to opportunities and challenges for actors in the coffee industry. Given the heterogeneity of market actors, these tend to exacerbate inequalities already present in the structure of production and marketing of coffee.JEL classification: L11, O13, G19

The Long Green Revolution

“…The dismantling of international marketing agreements, such as the International Coffee Agreement in 1989, preceded the full liberalization and subsequent financialization of a range of commodities under the Uruguay Round of the General Agreement on Tariffs and Trade (Newman 2009). The World Trade Organization's Agreement on Agriculture cemented neoliberal doctrines in agriculture, even if in the Global North these doctrines sat uneasily with ongoing transfers to agribusiness.…”

From Futures Markets to the Farm Gate: A Study of Price Formation along Tanzania’s Coffee Commodity Chain

“…There is evidence that commodity trading houses engage in speculative hedging in order to reap financial rewards in addition to the management of price risks in the context of increasingly volatile commodity prices (Newman 2009a). …”

“…As one trader interviewed by UNCTAD (2011, 44) put it, "the banks are trying to understand our markets and we try to understand their markets." This has had profound implications on the distribution of price risks along coffee chains and the ability of different chain actors to profit from financialized accumulation (Newman 2009a). …”

Accumulating through food crisis? Farmers, commodity traders and the distributional politics of financialization

“…Although there has been important work done in this area by scholars analyzing the expansion of derivatives markets in the Global South (e.g. Breger Bush 2012;Isakson 2015;Newman 2009), less attention has been given to the variegated impacts of price instability, and associated dynamics of financialization, on farmers in the Global North.…”

“…The domestic and international arrangements that emerged as a result of these ideas facilitated the development of what can be called a state-managerial food regime. In response to the distributional conflicts accompanying the Wall Street Crash and the Great Depression, the distinct social purpose of this regime was to curb speculation, collectivize risk and stabilize prices (Newman 2009;Winders et al 2015).…”