The Impact of World Commodity Prices on Developing Countries

Primary commodity prices and markets behave differently from those of manufactures or most services. Prices have fallen over time, so countries and producers dependent on them find that their income does not keep pace with the costs of imports or the costs of production. The fluctuations in their prices in response to 'normal' changes in demand or supply are larger than those in other prices, increasing the costs to producers of holding stocks or working capital, while some prices are also subject to unpredictable and uncontrollable shocks from weather or new discoveries. Thus producers face the dual problem of lower returns and higher risks. These problems face all countries, developed and developing, but they are more serious for developing countries.