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

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.

To achieve stable conditions in commodity trade, including avoidance of excessive price fluctuations, at levels which would

Moreover, those countries did not have a diversified export base and were very vulnerable to fluctuations in commodity prices.

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 .

(e) Price volatility

The trade of African countries is still dominated by commodities, which are subject to volatile price movements beyond their control.

Commodity prices are like this.

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.

Apart from wood, gold and diamonds, agricultural production is subject to the vagaries of climate and fluctuations in world commodity prices.

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).

Direct and indirect measures to reduce dependence on commodity exports and to reduce the impact of commodity price instability are thus crucial if Africa is to meet the Millennium Development Goals.

Commodity dependent countries, particularly in Africa, will require an integrated approach, including special support to diversify their exports, add value to their commodity exports, build the associated supply capacity, manage commodity price volatility and develop a new generation of commodity financing schemes.

Here, the Fed is making a fatal mistake, as it relies heavily on a timeworn inflation forecasting methodology that filters out the special factors driving the often volatile prices of goods like food and energy. The logic is that the price fluctuations will eventually subside, and headline price indicators will converge on the core rate of inflation.

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.

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

Africa and the least developed countries (LDCs) remain highly vulnerable to exogenous shocks, such as those related to weather or volatile international commodity prices.

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).

Chapter 3. Price control measures Measures intended to control the prices of imported articles for the following reasons (i) to sustain domestic prices of certain products when the import price is inferior to the sustained price (ii) to establish the domestic price of certain products because of price fluctuations in the domestic market or price instability in the foreign market and (iii) to counteract the damage caused by the application of unfair practices in foreign trade.

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

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.

Unstable prices for commodities were a serious issue.

Since most African countries depend on from two to three main primary commodity exports for the bulk of their foreign exchange earnings, their external performance and external indebtedness are directly influenced by short term instability of primary commodity prices.

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

In fact, most dollar commodity prices have fallen since the first half of the year. Though a host of sector specific factors affect the price of each commodity, the fact that the downswing is so broad as is often the case with big price swings suggests that macroeconomic factors are at work.

How can measures to increase commodity price stability and returns from commodity exports contribute to achieving the Millennium Development Goals?

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.

That is a surprising proposition, given that commodity bonds have an obvious latent market, rooted in real economic fundamentals. After all, steel companies have an inherent need to hedge against fluctuations in the price of iron ore, just as airlines and utilities have an inherent need to hedge against fluctuations in the price of oil.

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

Although these factors insulate the US from the inflationary pressures stemming from exchange rate fluctuations, they increase the vulnerability of other countries, especially emerging economies. Because the dollar prices of most of these countries imports are not very responsive to exchange rate movements, the pass through of those movements into import prices denominated in their home currencies is close to 100 .

Change due to fluctuation in the cost of fuel and lubricants.

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.

Security problems and disruptions in production also increased price volatility.

It is a sector marked by strong price and volume fluctuations.