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

Bernhard Tröster / Ulrich Gunter

Wien, Mai 2022

In this paper, the role of physical actors in the global value chains (GVCs) of coffee, cocoa and cotton as hedgers in the price determination on commodity derivatives markets is analysed in relation to speculators. A novel measure of buying and selling pressure by trader categories is applied in a GARCH model. Our findings show that liquidity provision by hedgers allows speculators’ position takings to drive returns. We identify hedging and pricing strategies as a determinant of hedgers’ activities on derivative markets, which also contribute to price transmission through GVCs and thereby expose producers of cash crops in the Global South to price risks.

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