Financialization of Rice in Vietnam: Lessons from the Coffee Market

Abstract

While rice trading gave birth to derivative finance in 17th century Japan, the rice market is globally unfinancialized and seems to stand as an anomaly within commodity trade. The Vietnamese industry is not an exception within the world rice market; it is presently deprived of derivative trading. Coffee, another major Vietnamese agricultural industry developed within a financialized framework, with the existence of Over-The-Counter (OTC) contracts traded locally, governmental attempts to set up local futures contracts and international futures markets in London and New York. In this context, I review the lessons that the Vietnamese rice industry can draw from its coffee industry counterpart regarding the prospect of financialization. I find that while the failures of the financialization process in coffee are likely to be repeated in rice, its successes will be more difficult to replicate.