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

Bargawi, Hannah K. and Newman, Susan A. (2017). From Futures Markets to the Farm Gate: A Study of Price Formation along Tanzania’s Coffee Commodity Chain. Economic Geography, 93(2) pp. 162–184.

DOI: https://doi.org/10.1080/00130095.2016.1204894

Abstract

This article examines the nature of price formation and transmission in the Tanzanian coffee price chain. To date, research on the real-world processes of price formation has been scant in economic geography and extant literatures. This article addresses this by focusing on price formation in geographically distant but connected markets, and the interaction between global and local price dynamics. The article employs a new framework that builds on chain and network approaches by integrating concepts from marketization and institutional approaches. The study finds that the world price of coffee has become increasingly volatile as a result of the behavior of international coffee traders and broader shifts in the character of global capital accumulation. It also demonstrates the varying role domestic marketing and local-level institutions play in shaping price formation and cushioning Tanzanian producers from sudden price changes. Finally, the study highlights the role prices, via these local-level institutions, play in extenuating differentiation between producers, creating winners and losers.

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