Commodity prices are like this.

Why Are Commodity Prices Falling?

There is also the issue of the so called reserve price (the highest price a buyer is willing to pay for a good or service). The reserve price places a cap on how high commodity prices will go, as it is the price at which demand destruction occurs (consumers are no longer willing or able to purchase the good or service).

There has been a steady effort to arrive at market based prices for energy commodities, and prices of some of them (notably oil products) have for some years been derived from the world market price.

The prices of primary commodities had declined against the prices of manufactures, especially during the 1980s.

Unstable prices for commodities were a serious issue.

CAMBRIDGE The prices of hydrocarbons, minerals, and agricultural commodities have been on a veritable roller coaster. While commodity prices are always more variable than those for manufactured goods and services, commodity markets over the last five years have seen extraordinary, almost unprecedented, volatility.

The prices of oil and many primary commodities have slipped.

Many delegations drew attention to the continuing volatility of primary commodity prices and to the fact that in real terms commodity prices are still lower today than they were some 20 years ago.

1. Takes note of the report of Secretary General on world commodity trends and prospects,A 59 304. including the fact that while prices have improved for some commodities, the real prices of others remain on a declining trend

3. Notes the need expressed by developing countries, in particular the commodity dependent developing countries, for stable and more predictable commodity prices, in the face of instability and decline in real terms of the prices of many commodities

7. The price boom began with non oil commodities in 1994.

Table 1 Monthly indices of market prices of selected primary commodities

Devaluation results in uniform price changes over the whole range of tradeable goods rather than for a selected number of products.

33. Among the perennial problems facing producers of commodities is the excessive instability of the prices of many commodities.

1. Notes the need of the developing countries, in particular the commodity dependent developing countries, for stable and more predictable commodity prices in the face of instability and decline in real terms of the prices of many commodities

Source UNCTAD, Monthly Commodity Price Bulletin, March 1998.

But, though inflation is very low, and even negative in a few countries, something more must be going on, because commodity prices are falling relative to the overall price level. In other words, real commodity prices are falling.

With regard to commodity prices it was suggested that income, rather than price, fluctuations are the real problem.

I've looked to see what is the relationship between higher commodity prices of exports, and the growth of commodity exporting countries.

Recognizing that commodity prices are an important element for heavily indebted poor countries that are commodity dependent in maintaining long term debt sustainability,

The contractor had offered a price of only 145,522 because, according to him, some items were shopworn, damaged and marked down.

The volatility of commodity prices poses a serious risk for the sustainability of growth, and better international coordination is required to reduce the instability of commodity prices and exchange rates.

Rendahnya harga komoditas dengan penurunan peak to trough lebih dari 30 berlangsung selama durasi yang sama, rata rata sekitar tujuh tahun. Kini kegagalan tersebut memasuki tahun keempatnya dan harga komoditas non minyak (dibandingkan harga ekspor barang manufaktur) telah merosot sekitar 25 .

It was widely agreed that the long run trend decline in the terms of trade of most non oil commodity prices (when measured against the prices of manufactured goods) and volatile swings around the long term price trend of commodities had adversely influenced many low income countries' capacity to benefit from trade.

But while the prices of the agricultural commodities appeared to have more or less stabilized, albeit at lower levels than those prevailing in mid 1997, most metal prices and that of petroleum continued to deteriorate up to February 1998 ( recent developments in major commodity markets, including those especially affected by the crisis, are examined below).

4. Expresses the urgent need for supportive international policies to improve the functioning of commodity markets through efficient and transparent price formation mechanisms, including commodity exchanges, and through the use of commodity price risk management instruments

Producers of primary commodities often suffer from the low prices paid to them.

It is premature, however, to say whether the recovery in commodity prices has peaked.

During the consultations, speakers discussed both the long term and the short term dimensions of the problem of commodity price volatility.

Possibly most clearly visible are impacts on prices, with studies showing that the presence of hypermarkets results in drops in prices for dried food, household goods and personal care, thus increasing the population's disposable income.

In particular, the volatility of food and commodity prices, including petroleum prices, is seriously denting the financing capacity of many poor countries.

Rising energy costs have directly affected prices for basic necessities and food.

2. Expresses the urgent need for supportive international policies and measures to improve the functioning of commodity markets through efficient and transparent price formation mechanisms, including commodity exchanges, and through the use of commodity price risk management instruments

Thus, with the exception of the prices of tropical beverages, in particular coffee and tea, the prices of the other commodities either declined or rose only marginally.

Recognizing that commodity prices are an important element for heavily indebted poor countries that are dependent on commodities for maintaining long term debt sustainability,

Secondly, there had been a shift from bulk commodities to high value commodities.

Then there are the countries including Venezuela, Argentina, and Russia that never moved in the reform direction in the first place. They were temporarily bailed out by strong world prices for their export commodities, but that ended last year.

11. The Secretary General of UNCTAD stressed that the Asian crisis had hit the poor particularly hard, in terms of sharp falls in commodities and in the export prices of some goods.

Now, over the last century, we tend to think of commodity exchanges as the purview of Western industrialized countries, and that the reference prices for cotton, coffee, cocoa products produced mainly in the south are actually a reference price, or a price discovered in these organized commodity exchanges in the northern countries.

Of course, technological advances, like hydraulic fracturing ( fracking ) in the shale gas industry, could increase supply and therefore lower prices. But mounting environmental challenges, and the limited availability of commodity substitutes, suggest that a reprieve on commodity prices is not near.

But primary product prices remain much more volatile than the prices of manufactured goods and services, causing large fluctuations in producers incomes. This exaggerates the effects of booms and busts.

The declining importance of primary commodities in world trade appears to foreshadow a continuation of the long term erosion in the prices of primary commodities relative to those of manufactured goods.

While it is fairly easy to obtain information on the price paid by the importers of a good, it might become difficult to obtain the corresponding price prevailing in the domestic market, especially at a fairly disaggregated level.

In addition, the General Compensation Fund has been established to enable the State to intervene with respect to the prices of goods, products or services classified as essential, and households then pay less than the true prices for the items consumed.