Recent
evidence suggests of a new trend in the world prices of agricultural
commodities. The price of US maize, which ruled at close to $85 a ton in
April 2002, rose by 35 per cent, to $115, by September. The price of
soybean jumped from $172 a ton in February to $220 by September, a rise of
28 per cent in seven months. US hard red winter wheat climbed from $123 a
ton in May to $190 (a 54 per cent rise), while the soft red variety moved
from $111 to $154 (a 39 per cent rise). Other commodities, like palm oil,
coconut oil, cotton and cocoa, also recorded similar price increases
(Charts 1 to 8). The instances of stagnation or decline in the prices of
some commodities such as rice, groundnut and coffee (Charts 9 to 12),
appear to be exceptions rather than defining the rule.
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These observed increases of between 25 and 55 per cent in the prices of
agricultural commodities within a relatively short period of time are
remarkable because they point to a new tendency in world commodity
markets. Till recently, most agricultural commodities had been
experiencing long-run declines in their prices, starting from as far back
as 1994 (Charts 13 to 16), which was the year when the Agreement on
Agriculture (AoA), signed as part of the Uruguay Round of trade
negotiations, began to be implemented. Advocates of the AoA had at that
time argued that its implementation would result in a decline in developed
country exports of agricultural commodities, and in an increase in the
volume and prices paid for agricultural exports from developing countries.
This was to result in substantial welfare gains for the developing
countries. In practice, however, those promises remained unrealized as
commodity prices underwent a long-run decline. But if the new tendency for
prices to rise is sustained over the coming months, we could be witnessing
a major breakthrough for commodity producers in world markets.
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While it is true that primary products as a whole accounted for just 30
per cent of developing country exports at the end of the 1990s as compared
to more than 90 per cent in the mid-1950s, and that the share of non-fuel
primary products (agricultural products and non-ferrous metals) in
developing country exports fell by nearly one half, to 12 per cent,
between the mid-1980s and late 1990s, agricultural exports are still
important to a large number of countries. According to figures collated by
the WTO, in the late 1960s, the large majority of developing countries,
103 out of 111 to be precise, were predominantly exporters of primary
products. Between 1968–70 and 1998–2000, only 27 of these made the
transition to being predominantly exporters of manufactured products and
76 remained primary product exporters, with a large number of them being
dependent on agricultural exports. The prospect of buoyancy in
agricultural prices is therefore of some significance to poor countries,
especially in Africa.
