Financialisation of Commodity Markets

Given the commodity price boom in the 2000s and the large fluctuations in commodity prices in recent years, questions about the factors behind these price developments are of central importance. One is the role of financial investors, especially banks, institutional investors and hedge funds, and their greatly increased presence in commodity derivatives markets. The potential impact of this so-called financialisation of commodity markets on commodity price developments and the question of appropriate regulations are controversially discussed.

Furthermore, the transmission channels of price fluctuations in financial markets for commodities to physical commodity value chains are crucial. Here, the focus is on price setting and the role of international commodity trading houses in order to analyse the impact of financialisation on producers in the Global South.

ÖFSE is working intensively on these issues and their linkages. For example, the research project "Financial Markets and the Commodity Price Boom", which was funded by the Austrian National Bank as part of its anniversary fund, showed that the increasing importance of financial investors in commodity derivative markets - in addition to fundamental and macroeconomic factors - has influenced the prices of coffee, cotton, wheat, crude oil and aluminium and fundamentally changed the structures of commodity markets. These findings also call into question the extent to which commodity derivatives markets still fulfil their real economic functions of price discovery and hedging of price risks. Likewise, the risks posed by financialisation to smallholder farmers in the cotton sector in different countries were highlighted and the influence of different price regulation systems was analysed.

In other research projects ("Financialising commodity markets and global value chains in cocoa and coffee? The role of commodity trading houses" and "The role of commodity prices for socio-ecological transformation" - also financed by the anniversary fund of the Austrian National Bank), international commodity trading houses and their multiple roles and strategies in physical commodity and financial markets for agricultural and mineral commodities are analysed.

For more information contact:

Dr. Bernhard Tröster
Researcher
phone: +43 1 317 40 10 – 117  
b.troester@oefse.at
1090 Vienna, Sensengasse 3
 
more Information

Publications on the topic:

Working Paper 68

Trading for speculators: The role of physical actors in the financialization of coffee, cocoa and cotton value chains

Bernhard Tröster / Ulrich Gunter

Wien, May 2022

In this paper, the role of physical actors in the global value chains (GVCs) of coffee, coco ...

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Briefing Paper 25

Commodity-dependent countries in the COVID-19 crisis

Bernhard Tröster

Wien, May 2020

Commodity markets have reacted to the COVID-19 crisis with drastic price movements and chang ...

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Working Paper 62

Commodity dependence, global commodity chains, price volatility and financialisation: Price-setting and stabilisation in the cocoa sectors in Côte d'Ivoire and Ghana

Bernhard Tröster / Cornelia Staritz / Jan Grumiller / Felix Maile

Wien, December 2019

Commodity price volatility remains a crucial challenge of commodity-dependent countries of t ...

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Policy Note 12

Regulation of commodity derivative markets – Critical assessment of reforms in the EU

Karin Küblböck / Cornelia Staritz

Wien, December 2014

Commodity prices that are increasingly determined on global commodity derivative markets are ...

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Working Paper 45

Re-regulation of commodity derivative markets

Critical assessment of current reform proposals in the EU and the US

Cornelia Staritz / Karin Küblböck

Wien, October 2013

In the context of recent commodity price hikes, a political consensus has emerged on regulat ...

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Policy Note 9

Commodity Prices, Financial Markets, and Development

Financialisation of Commodity Markets and Necessary Policy Reforms

Cornelia Staritz / Christine Heumesser / Karin Küblböck

Wien, October 2013

Given the far-reaching implications of commodity prices in particular for developing countri ...

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Working Paper 44

Financialisation and the microstructure of commodity markets

a qualitative investigation of trading strategies of financial investors and commercial traders

Christine Heumesser / Cornelia Staritz

Wien, October 2013

The financialisation of commodity derivative markets, reflected in the increased presence of ...

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