The Crop with no Futures: Explaining the Absence of Derivatives Trading in the Rice Market

This research explores the reasons behind the low financial development (materialized by the use of derivatives trading) of the rice market, unique within the realm of large commodity markets. Through a comparison with crops with highly liquid futures markets (coffee, sugar and wheat), this article argues that the low financial development of rice is not due to one impeding factor but the accumulation of many instead. Of these, the most prominent are the disincentives for the participation of financially sophisticated actors, and the politicization of rice. The author argues that both factors find their root in the geographical organization of the market, which is highly concentrated in developing economies.