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ABSTRACT
This paper explores the dialectical entanglements of the highly liquid and volatile trading of cocoa in its financial derivative form, and the small-scale, labour-intensive peasant production in its physical form. To do so this paper deploys financialization as a concept analytically subordinate to changes in global value relations which, we argue, shine a light on the internal relations between the global financial trading and local production of cocoa. Based upon detailed empirical research in the Ecuadorian cocoa sector, the paper demonstrates how the financialization of agro-industrial linkages have been internalized into uneven production relations between peasant producers facing low and volatile farm-gate prices, thereby producing a heterogeneous form of social class restructuring.
Acknowledgements
I would like to thank Estefania Martinez for invaluable research assistance the Guest Editors of this collection, Michael Levien, Michael Watts and Yan Hairong, the anonymous reviewers and the various people who gave up their time to be interviewed for this paper. The usual caveat applies.
Disclosure statement
No potential conflict of interest was reported by the author.
Thomas Purcell has a PhD in politics from the University of Manchester. He is currently a senior lecturer in politics and international relations at Leeds Beckett University. Until recently he was the Sub-director of CENEDET, at the Instituto de Altos Estudios Nacionales (IAEN). His research interests lie in the political economy of development, with a regional focus on Latin America and Southern Europe. He is the co-author of The limits to capital in the European periphery: capitalism, crisis and revolt in Spain (2014). His current research focuses upon the political economy of ‘post-neoliberalism’ in Ecuador and Venezuela. Email: [email protected]
Notes
1 Research conducted between 2012 and 2015 found that the average cocoa farmer earns less than USD 1.00 per day, significantly below the extreme poverty line (Cocoa Barometer Citation2015, 2, note 3).
2 Here we follow Bernstein’s (Citation2001, 29) concept of petty commodity production which ‘specifies a form of small-scale (“family” or “household”) production in capitalism engaged in more or less specialized commodity production and constituted by a particular combination of the class places of capital and labour’.
3 The research for this paper was conducted as part of the National Strategy Centre for the Right to Territory (CENEDET) housed at the state postgraduate university the Instituto de Altos Estudios Nacionales (IAEN) and directed by the Marxist human geographer David Harvey. As scholars operating within the Ecuadorian state apparatus we undertook a sustained investigation into the cocoa sector and benefitted from 31 in-depth interviews within the Ministry of Agriculture (MAGAP) and their Cocoa department (three interviews). We also travelled extensively across cocoa-producing zones in Ecuador carrying out semi-structured interviews with small cocoa producers (15), producer associations (six), intermediaries (three), exporters (two) and the cocoa chamber of commerce ANECACOA (two). This paper draws on only a portion of this wider research, focusing more squarely on, but not limited to, a case study conducted with four producer associations.
4 This paper is concerned with the process of price formation in bulk cocoa trade or ‘fair average quality’. The trade in speciality, or fine aroma, cocoa is a marginal segment of the overall market (five percent) and involves quite distinct processes of price formation through premium price fixed contracts outside financial markets (see Purcell, Martinez, and Fernandez Citation2018).
5 Ownership of the GSCI was transferred to Standard & Poor’s in 2007, becoming the S&P GSCI Index.
6 Position limits legally controlled the number of futures contracts that a non-commercial trader (speculator) could hold at any one time (see Clapp Citation2014, 802).
7 The aggregation of all market information – that is, ‘traders’ collective wisdom about the probabilities of future economic outcomes’ – is known as the price discovery role of futures markets (Isakson Citation2014, 757).
8 The turn-key network system allows merchant contractors to improve industrial efficiency (through automated and programmable production systems) so that orders and contracts can be fulfilled with a low degree of uncertainty (Fold Citation2002, 243).
9 However, see Newman (Citation2009) for a consideration of the role of finance and financial markets in the coffee commodity chain.
10 For example, in 1994 Cargill founded Cargill Risk Management (CRM) to sell individualized financial products for its own purposes and for third-party customers (Clapp Citation2014, 804).
11 When futures prices are below spot prices – the normal state argued by Keynes (Citation1930) – the market is said to be in ‘backwardation’.
12 Space restricts a full historical account, but cocoa formed the basis of Ecuador’s insertion into the world market in the late nineteenth and early twentieth centuries and was integral to the generation of foreign exchange, the banking sector and incipient processes of industrialisation; for the classic accounts see Chiriboga (Citation2013) and Guerrero (Citation1994). Although not addressing the cocoa economy specifically, see Peralta and Hollenstein (Citation2015) and Clark (Citation2017) for recent accounts of rural territorial dynamics and agricultural development in Ecuador.
13 Interview, Father Graziano Mason.
14 Interview, Father Graziano Mason.
15 For example, the Bancodesarrollo and Fondo Ecuatoriano Populorum Progressio (FEPP), linked to the Ecuadorian Episcopal Conference, form part of the financial support network within the rural economy.
16 Interview, COCPE President.
17 Interview, COCPE President.
18 Interview, MCCH General Manager.
19 Interview, AgroMaquita exporting arm of MCCH.
20 This is referred to as ‘basis risk’ when the cash price moves out of sync with the futures contract. The ‘basis’ is defined as the cash price less the future price at a given point in time (Breger Bush Citation2012, 69).
21 Interview, MCCH President.
22 Interview, MCCH President.
23 Interview, Pepa de Oro President.
24 Interview, MCCH General Manager.
25 Created legally in 1999, UNOCACE is another important association of producers, composed of 12 organizations in five provinces of Ecuador which amounts to almost 1000 small producers covering nearly 5000 hectares.