Economic imperatives of financialization of agricultural commodity markets

Keywords: financialization, agricultural commodities, corn futures, wheat futures, volatility, basis, emerging economy, derivative market, hedge effectiveness, Ukraine.


Purpose. The purpose of the article is to substantiate the theoretical and methodological foundations and economic feasibility of intensifying the processes of financialization of the business model of Ukrainian grain producers, in particular through the formation of the grain futures market and the creation of commodity exchange in Ukraine.

Methodology / approach. In the article, it is clarified the concept of financialization as one of the global trends of economic development that provides deep integration of financial and real economy on macro- and micro levels. Hedge effectiveness of price risks for Ukrainian grain (wheat and corn) using futures contracts traded on CME Group and Euronext is evaluated using regression analysis. Ukrainian wheat and corn FOB price volatility for 2016–2021 marketing years is estimated. The dynamics and volatility of the basis for Ukrainian wheat and corn and respective futures contracts traded on CME Group and Euronext are analyzed.

Results. The analysis of securitization index of global agricultural markets has shown an increase of its financialization rate. The main reasons for this process were the deepening of financial and commodity markets integration, deregulation of financial markets and introduction of new financial instruments. The structure of the grain market in Ukraine is analyzed, particularly the role of agricultural holdings and international companies. The tendencies and determinants of wheat and corn market prices in Ukraine during marketing year are revealed. Regression analysis of hedge effectiveness has shown that all considered futures contracts are suitable for wheat and corn CPT and FOB price hedging in Ukraine. The highest hedge effectiveness was revealed for Black Sea Corn Financially Settled (Platts) Futures) (CME Group) and Milling Wheat / Ble de Meunerie (Euronext Matif). Short hedge efficiency of CME Group futures contracts was supported by analysis of basis dynamics for Ukrainian wheat and corn and respective futures contracts.

Originality / scientific novelty. Based on the analysis of the theoretical foundations of financialization, the positive and negative consequences of the strengthening of financialization of global commodity markets and the peculiarities of the functioning of the modern grain market in Ukraine, the economic imperatives of the development of the Ukrainian market of grain derivatives, as an objectively determined trend of agricultural commodity market, are substantiated. The evaluation of the effectiveness of hedging price risks on the Ukrainian grain markets using derivatives traded on global exchanges has gained further development.

Practical value / implications. It is proposed to intensify market tools usage for risk hedging in Ukraine in order to cover interests of all market participants. Risk management instruments available for Ukrainian agricultural producers are discussed.


Sawyer, M. (2013). What is Financialization? International Journal of Political Economy, 42(4), 5–18.

Investopedia (n.d.) What Is Financialization? Available at:

Marx, K. [1894] (2010). Capital. Vol. III, part V. In Collected Works, Vol. 37. Lawrence and Richart, London.

Hilferding, R. (1981). Finance Capital. A Study of the Latest Phase of Capitalist Development. Ed. T. Bottomore. Routledge & Kegan Paul, London.

Keynes, J. M. (1930). Treatise on Money. Harcourt, Brace & Co.

Minsky, H. P. (1996). Uncertainty and the institutional structure of capitalist economies: remarks upon receiving the Veblen-Commons award. Journal of Economic Issues, 30(2), 357–368. Available at:

Busch, L., & Bain, C. (2004). New! Improved? The transformation of the global agrifood system. Rural Sociology, 69(3), 321–346.

Krippner, G. (2011). Capitalizing on crisis: the political origins of the rise of finance. Cambridge, MA, Harvard University Press.

Lapavitsas, C. (2013). The financialization of capitalism: ‘Profiting without producing’, City, 17(6), 792–805.

Keynes, J. M. (1923). Some aspects of commodity markets. Section 13. European Reconstruction Series, Manchester.

Hicks, J. R. (1939). Value and Capital. Oxford University Press, Oxford and New York.

Kaldor, N. (1939). Speculation and Economic Stability. The Review of Economic Studies, 7(1), 1–27.

Tang, K., & Xiong, W. (2012). Index investment and the financialization of commodities. Financial Analysts Journal, 68(6), 54–74.

Hellwig, M. F. (1980). On the aggregation of information in competitive markets. Journal of Economic Theory, 22(3), 477–498.

Acharya, V. V., Lochstoer, L. A., & Ramadorai, T. (2013). Limits to arbitrage and hedging: evidence from commodity markets. Journal of Financial Economics, 109(2), 441–465.

Adams, Z., & Glück, T. (2015). Financialization in commodity markets: a passing trend or the new normal? Journal of Banking & Finance, 60(C), 93–111.

Brunnermeier, M. K., & Pedersen, L. H. (2009). Market Liquidity and Funding Liquidity. The Review of Financial Studies, 22(6), 2201–2238.

Sockin, M., & Xiong, W. (2015). Informational frictions and commodity markets. The Journal of Finance, 70(5), 2063–2098.

Cheng, I.-H., & Xiong, W. (2014). Financialization of commodity markets. Annual Review of Financial Economics, 6(1), 419–441.

Fairbairn, M. (2015). Finance and the Food System. In Handbook of the International Political Economy of Agriculture and Food. Northampton, MA, Edward Elgar. Available at:

Russi, L. (2013). Hungry Capital: the Financialization of Food. John Hunt Publishing.

Bonanno, A. (2016). The financialization of agriculture and food in the context of the neoliberal restructuring: primary characteristics and basic contradictions. Estudios Rurales, 5(10), 1–17.

Isakson, S. R. (2014). Food and finance: the financial transformation of agro-food supply chains. The Journal of Peasant Studies, 41(5), 749–775.

Balling, M., & Gnan, E. (2013). 50 years of money and finance: lessons and challenges. SUERF 50th anniversary volume. SUERF. Available at:

Slovo i Dilo (2021). Derzhstat listed the most profitable sectors of the economy in 2020. Available at:

World Federation of Exchanges (2021). WFE derivatives report 2020. Available at:

CME Group (2019). Managing Price and Counterparty Risk. CME Group Black Sea Wheat and Corn Contracts. Available at:

CME Group (2021). Black Sea Corn grows as regional benchmark. Available at:

Latifundist (2021). Euronext developing Ukrainian wheat futures. Available at:

State Statistic Service of Ukraine (2021). Agriculture. Available at:

USAID Financial Sector Transformation Project (2020). Prospects of using derivatives in the grain market of Ukraine. Grain market research. Available at:

Latifundist (2022). Top 100 Ukrainian latifundists rating. Available at:

AgroChart (2021). Market review. Available at:

Stuart, K., & Runge, C. F. (1997). Agricultural policy reform in the United States: an unfinished agenda. The Australian Journal of Agricultural and Resource Economics, 41(1), 117–136.

Agrarian Fund (2022). Purchases of grain harvest 2022. Available at:

Agravery (2021). Grain forwards. How to profitably sell the crop that has not yet been sown. Available at:

AgroPolit (2020). Failure to fulfill forward contracts – a sentence for farmers or a way to dialogue with traders? Available at:

FinCAD (2011). Basics of hedge effectiveness testing and measurement. Available at:

How to Cite
Hrabynska, I., Kosarchyn, M., & Dąbrowska, A. (2022). Economic imperatives of financialization of agricultural commodity markets. Agricultural and Resource Economics: International Scientific E-Journal, 8(3), 5-25.