8^th Geneva Roundtable on Trade-related Issues

COMMODITY-SPECIFIC TRADE ISSUES AND THE IMPLICATIONS OF POSSIBLE

MODALITIES FOR COMMITMENTS IN THE CONTEXT OF THE

WTO NEGOTIATIONS ON AGRICULTURE

Geneva, 8 November 2002

Paper No. 2

Developments in global agricultural markets since 1995

Commodities and Trade Division

Developments in global agricultural markets since 1995 ¹

I. INTRODUCTION

1. This paper addresses the issues of whether and how the implementation of Uruguay Round Agreement commitments has affected the functioning of agricultural commodity markets during the period 1996 to 2001. An overall assessment is first provided, which summarizes key conclusions. This is followed by a review which briefly details experience on a commodity by commodity basis. Finally, a quantitative assessment of commodity price behaviour looks for structural changes in various markets to detect if and how international market function has changed as a result of policy reform.

II. OVERALL ASSESSMENT

1. To date, implementation of commitments of the Uruguay Round Agreement on Agriculture (URAA) is considered to have had direct effects on the functioning of most international agricultural commodity markets which may have been relatively insignificant compared to those of other important market developments.

2. For many commodities, the buoyant period 1995-98 partly reflected implementation of the UR commitments, or at least policy actions taken in the period before or shortly after the signing of the Agreement. This was mainly the case for cereals, oilseeds, milk products and meat where policy adjustments, export subsidy reductions, and the opening of minimum access commitments may have had some impact. Prices of many products rose dramatically during this period as production growth slowed and stocks were drawn down. Though the exact contributions of the various causes of these developments are difficult to identify, it is likely that the gradual reduction of government intervention in agricultural commodity markets played a role. However, in the case of most of the other major agricultural commodities, the tendencies prevailing in 1995-98 had more to do with other factors, such as weather, the phase of the commodity cycle or developments in other markets, e.g. synthetics or competing products.

3. The weakness of many agricultural prices in 1998-01 underlines the important role of many factors, including supply response to previously high prices, the financial crises and resulting economic slowdown that affected many countries, as well as a strengthening of the US dollar. Importantly, the weakness in certain markets during this period also provided the first test of policy reforms in the face of substantial price pressure, not only uncovering the readiness of many developed countries to rapidly increase support, but also the size of “room” within existing commitments to accommodate such increases. Increased support has tended to delay recovery in markets. The depth of price fall for many commodities was the most severe since the base period for commitments of the Uruguay Round. Furthermore, an important feature of the post URAA period is the decline in public stocks for certain commodities, which may have implications for market function particularly when markets recover.

4. In general, although not conclusive, there is increasing evidence that international price behaviour for many commodities is changing, if not as a direct consequence of the implementation of UR commitments, then as a result of market fundamentals and of policy reforms/changes undertaken in the past decade or so. Some of these factors include, inter alia, increasingly re-structured domestic supports, participation in regional trade agreements, international trade expansion relative to production, and growing market shares of countries that were traditionally not important players.

III. COMMODITY BY COMMODITY ANALYSIS

Grains (wheat and coarse grains)

1. During the period 1996-01, world grain production averaged 6 percent higher than that of the 1990-95 period. A sudden surge in world prices during the mid-1990s stimulated grain production but as world consumption failed to keep pace with the rise in global production, international prices continued to decline. Overall during 1996-01, average wheat and maize prices were down 13 percent (US$20/t) and 11 percent (US$13/t) respectively (see Table 1).

2. Generally, and in spite of declining prices during the 1996-01 period, the continuation and enhancement of domestic support to producers in a number of major exporting countries helped to sustain production levels. In the United States, support under the FAIR Act (1996) was supplemented with emergency payments. In the EC, export taxes were introduced during the 1995/96 season to curb exports as international prices rose above internal prices; soon after, the mandatory set asides rates were lowered in order to encourage higher production. Although the Common Agriculture Policy reform under the Agenda 2000 reduced the price support (lowered intervention prices), it also increased area payments.

3. For market access, tariff-rate quotas (TRQs) on grain imports are relatively small. At the global level, most of the 17 countries holding TRQs for wheat imported more than the in-quota level - mainly due to relatively low applied above-quota tariffs and through preferential trade agreements. For coarse grains, most countries with TRQs reached, if not exceeded, their minimum access commitments. Meanwhile, uncertainties concerning phytosanitary standards have grown, particularly in connection with trade in products containing GMOs. Such uncertainties often limited market access in some countries, and have made settlement under the SPS agreement necessary.

4. Global trade in grains also appeared to have been little affected by export subsidies, which remained well below the URAA commitment levels. In the case of the United States, export subsidies have not been used for grains since 1995. In the EC, a weak Euro (vis-à-vis the US dollar) mitigated the impact of low world prices and allowed large exports, at times, even without, or with only small, export refunds (subsidies)
.

5. Overall, given the magnitude of forces impacting the global grain market since 1996, it is difficult to disentangle the impact of the URAA from the effects of other market developments. For example, the more recent downward price pressure is mainly driven by rising exportable supplies from a number of non-traditional exporters, including net-importing countries such as Brazil (maize), Pakistan and India (wheat). Another important factor for weak prices is China. Subsequent to a continuing decline in China’s cereal stocks since 1999 (as a consequence of a gradual liberalization of its domestic market and price policies prior to its accession to WTO) the country’s reliance on wheat imports has been greatly diminished while maize exports continue to make headway, especially in the nearby markets.

Rice

6. World rice production was, on average, 10 percent higher in 1996-01 than in 1990-95. However, there was a sizable drop in global production in 2000 and 2001 due to reduced production in China. Trade grew spectacularly from 16 to 24 million tonnes, mainly as a result of surging imports by a number of Asian countries that faced crop shortfalls in the aftermath of the 1997 El Niño weather anomaly and increased shipments to Africa. International prices fell 6 percent from 1990-95 levels, falling more sharply later in the period.

7. Rice producing countries generally maintained expansionary production policies in the post-URAA period. The exception is China, which has reduced support to the sector since 1999. For market access, larger imports to Africa have been fostered by changes in government policies since the mid-1990s, when para-statal institutions responsible for rice marketing and trade were dismantled, non-tariff barriers eliminated and tariff levels reduced. Most of these policy shifts took place in the context of countries’ commitments with international financial institutions rather than with the Uruguay Round Agreement. However in other markets, prohibitive tariffs limited market absorption. Recourse to export subsidies, which had been rather limited in the aftermath of the URAA implementation, were resumed in recent years. Government-to-government deals, often involving state trading agencies, also gained renewed popularity.

8. Overall, the implementation of the URAA had only a limited deterring effect on countries to use trade distorting policies. The sharp drop in rice quotations in the late 1990s was mainly the reflection of global supply/demand imbalances, continued poor transmission of world to domestic prices and a growing use of export subsidies that was not always consistent with the URAA provisions.

Sugar

9. World sugar production, trade and stocks from 1996 through 2001 exceeded the levels of the 1990-95 period, with production up 14 percent, as record output in major producing nations surpassed growth in global consumption. Trade and stocks increased 23 and 26 percent respectively, resulting in global stock-building and increased export volumes, and sustained downward price pressure. World sugar prices declined 17 percent between 1990-95 and 1996-01, hitting 14-year lows in early 2000. Exports from Brazil increased nearly 65 percent between the two periods, driven largely driven by a 62 percent devaluation in the Real since 1999, and deregulation of the fuel alcohol sector, which encouraged increased export volumes.

10. Sugar policy reforms have largely been directed at the supply side where instruments have been introduced to reduce inefficiencies and enhance competitiveness of producing countries. Among smaller producers, rationalization of the industry, diversification and exit strategies were explored for their macro-economic impact. As for international trade policies, the only significant development occurred in developing countries where market access increased by 150 000 tonnes and accounted for 90 percent of the increase in concession reached under the first 5 years of the Uruguay Round. Recent policy developments have seen virtually unchanged sugar policy in the United States, as codified by the passage of the 2002 Farm Bill. Essentially the US Sugar Program created an incentive for sugar producers in the United States to expand domestic production, which has in turn resulted in import levels at or near the minimum access agreement. The more significant development has been the Everything But Arms (EBA) initiative which was introduced by the European Commission to enhance market access by Least Developed Countries (LDCs) at the expense of the existing ACP quota holders. In other words, there is no net gain in market access to the EU, but a redistribution of the SPS quota which ranges from 200 000 to 300 000 tonnes each year. Under EBA, which came into effect for sugar in 2001, a volume of 74 000 tonnes of sugar (raw equivalent) has been removed from the overall SPS quota and redistributed to LDCs. This base quantity will increase by 15 percent each year until 2006 when quotas will be removed altogether.

11. Implementation of commitments under the URAA had little or no impact on world sugar markets during 1996-01 in the context of these developments. Efforts to address sugar policy reform have not advanced significantly in either the EU or the US, and provide further evidence of the potential for near-term status quo in world sugar markets. Furthermore, recent trends indicate increased use of differential import tariffs and domestic policies to protect national sugar producing industries from lower world sugar prices.

Oilseeds complex

12. World production and trade of oilseed products continued to trend strongly upwards, exceeding the levels of 1990-95 by some 25 percent and 40 percent respectively. On average, prices of oils and meals rose considerably from 1993 to 1998, with a subsequent sharp fall from 1999 to 2001, averaging about the same over the two periods.

13. Policy adjustments introduced since 1995 to comply with the UR agreements had little direct bearing on the various oilseed industries and no immediate effect on global production and trade in oilseed products. As a matter of fact, support through direct market intervention or export subsidization programmes had been largely discontinued before the UR agreements came into force in 1995. The exception was the UR related Blair House Accord, which introduced a limit on the area planted with oilseeds for which EU farmers would receive support payments. This slowed expansion of oilseed production in the EU. With the decline in world prices beginning in 1998-99, a number of exporting countries (notably the US, Malaysia and Indonesia) increased direct support to oilseed producers - though generally within the limits introduced under the various UR agreements.

14. Adjustments to meet the various WTO requirements in the area of market access had minimal impact trade. With the price declines after 1999, several major importing countries (notably India and China) raised border protection to shield domestic oilseed industries from international competition, again within the boundaries established under the URAA. Furthermore, trade in oilseeds and derived products have been recently affected by regulations related to health issues and biotechnology. Trade in certain oilseeds declined due to the introduction of more stringent sanitary regulations in some countries. An increasing number of countries have introduced regulations to control trade in genetically modified oilcrops, notably soybeans and its products.

15. The development of international prices for oilseeds and derived products during the 1990s cannot be directly related to the introduction of the UR commitments. The rise in prices in the oilseeds complex from 1993 and the subsequent major depression in 1999-00 were driven by changes in the market fundamentals, reflecting, inter alia, macroeconomic developments, particular weather patterns and, in the case of oilmeals, close linkages with other commodity markets (feed grains).

Meat

16. Global meat markets witnessed healthy gains in production and trade in the period 1996-01 compared to 1990-95. Production and trade in bovine meat increased by 13 and 15 percent, while for pigmeat these increased by 20 and 70 percent, and for poultry by 40 and 235 percent respectively. Meat trade remained less than 10 percent of global production. Average prices for bovine meat and poultry each declined almost 20 percent, while pigmeat prices dropped 3 percent, and sheepmeat prices gained over 30 percent.

17. The Uruguay Round Agreements were expected to strengthen global demand for meat products and lift international prices, driven mainly by the market access and export subsidy commitments. Of the various meat products, beef was expected to be most affected since both export subsidies and market access barriers were more prevalent than for other meats. Direct production support to livestock sectors remained minimal with only limited support through direct market intervention, which declined further in some countries. Market access improved for all meats through tariff quota arrangements, and reductions in tariffs. Export subsidies declined significantly, particularly by the EU. However, in the past few years, as a result of governments’ concern about the risks of animal disease transmission, over 300 SPS notifications have related to border restrictions on meat products, nearly 60 percent of which were submitted in 2001 in response to outbreaks of foot and mouth disease (FMD) in Europe and concern about the spread of bovine spongiform encephalopathy (BSE).

18. Although some policy commitments have affected global markets for meat, other unforeseen market developments have obscured these effects. A host of factors—the emergence of food safety concerns in Europe and Japan, the financial crises rippling around the world since 1997, and the recent outbreaks of animal disease in meat exporting countries—have slowed demand for and trade in meat. This put downward pressure on international prices, except for sheepmeat where prices increased significantly, given the food safety concern for other meat substitutes. Relative to the impact of these developments, the impact of the URAA is considered minor.

Milk and Milk Products

19. Global milk production increased by 5 percent in 1996-01 compared to 1990-95. Trade in milk products increased 20 percent, and as a ratio to production from 5.5 percent to 6.3 percent. Prices increased 8 percent, however, they have decreased significantly in late 2001 (and especially in 2002).

20. Under the Uruguay Round Agreement the dairy sector remains highly protected in a number of countries through high support prices and/or high subsidy payments to producers, prohibitive border measures and high export subsidies. In some cases, support or intervention prices have been reduced. For market access, developed countries’ tariff peaks (often large specific tariffs) have remained prohibitive, normally over 100 percent and as high as 370 percent, while those of developing countries range from zero to 65 percent. Tariff reductions have therefore not usually translated into increased effective access. However, the minimum and current access commitments made under TRQs represent a significant share of world trade for a number of dairy products, especially butter and cheese, creating marginally increased access. In some cases high SPS and product quality standards also have posed access problems. Continued high access barriers have encouraged production and trade of new products, such milk protein concentrates, with currently no or low tariffs. Finally, the dairy sector is major user of export subsidies. Some 29 percent of all export subsidies in the base period used for calculating URA commitments were accounted for by dairy products. For dairy products overall, there is a high concentration of export subsidies in a few countries and a few commodities. These have generally been reduced during UR implementation, but have reverted recently to high levels as prices have fallen. Some countries have found other means of exporting products, even with continued high internal support levels.

21. Over the period of the URA implementation, prices for dairy products have been volatile and it is difficult to draw conclusions on the effect of the Round on international markets, given the influence of many, often more significant market developments. Initially, market prices strengthened considerably, perhaps partially due to marginal increases in access, and declines in subsidized exports. However, recent increases in export subsidies indicate that commitments were generally not constraining.

Bananas

22. Banana exports in 1996-01 were about 26 percent above the 1990-95 levels. Global banana trade over 1990-01 grew at an average annual rate of 4 percent, with a decreasing rate of growth in recent years. Import prices decreased about 10 percent from an average 648 US$/tonne during 1990-95 to 585 US$/tonne during 1996-01.

23. As a result of UR commitments, Most Favoured Nation (MFN) tariff rates are being lowered. Expectations of the effect of the UR on the banana market were largely foreseen in connection with the EC Framework Agreement, including its tariff quotas. Based on cases brought by the United States and Ecuador against the EC, the Dispute Settlement Panel (DSP) found that the EC banana import regime violated several sections of the General Agreement on Tariffs and Trade (GATT), particularly Article XIII and also elements of the General Agreement on Trade in Services (GATS). The EC and US reached agreement on the dispute on 11 April 2001, followed by an EC-Ecuador agreement on 30 April 2001. Country quotas were eliminated and 100 000 tonnes were shifted from tariff-quota C (reserved for bananas originating from the so-called ACP -African Caribbean and Pacific- countries) to the main tariff-quota A/B which is used by “dollar area” suppliers. This agreement enabled the EC to obtain a waiver within the WTO reserving a fixed quantity of imports to ACP countries in quota C and giving them a preferential tariff of zero in quota A/B compared to 75 € per tonne for non-ACP suppliers. One outcome is that the largest multinationals have achieved a dominant position in the EC market. The EC has announced that it will move to a tariff-only banana import system in 2006. However, a tariff preference is to be maintained for ACP suppliers. The level of the tariff will be hotly contested, but has to be evaluated as compatible with WTO rules when it is decided.

24. Hence through the Dispute Settlement mechanism, the UR has had an important indirect effect on the world banana economy. The agreements have improved market stability for the moment. In the future, a tariff-only regime in the EU may open up the possibility for some developing countries (in particular in Latin America) to sell more fruit in the EC market. At the same time, it may lift some of the protection that the current system provides to other developing countries (i.e. ACP countries), and these in turn may lose some market share and corresponding export earnings.

Citrus

25. Exports of citrus products declined marginally 1996-01 period, compared to 1990-95, largely due to recent production shortfalls. Each of the four citrus varieties has its own distinct market, so prices for each have varied with crop size in major producing areas, but in general prices have remained relatively stable over the period. Some prices for fresh easy peelers and oranges in North American and some Asian markets may have declined somewhat due to commitments emerging from the Uruguay Round which permitted increased import competition.

26. During the post UR period, the EC changed its import regime for fruits and vegetables, substituting entry prices and maximum tariff equivalents for reference prices and countervailing duties.  The United States reduced its MFN import tariff for frozen concentrated orange juice (FCOJ) by 15 percent. Under the Sanitary and Phytosanitary (SPS) Agreement, the process of harmonising testing procedures is leading to increased access, although much remains to be realized. It has been anticipated that several major importing countries would lift bans on citrus imports that were based on phytosanitary grounds when it could be demonstrated that risks were kept very low. For example, Japan has agreed on import protocols for Australian mandarins. The United States Department of Agriculture (USDA) allowed imports of Argentine lemons, but after one season, these have been blocked by Federal Court order sought by US lemon growers alleging that USDA did not set the proper protocols for permitting the imports. In the EC, SPS negotiations have enabled Argentina and Uruguay to ship more easily to the EC market. The entire trade/SPS issue has been complicated by a US ban on Spanish clementine imports leading to the possibility of a US/EC dispute in the WTO if not fully resolved by the fall of 2002. While China and the Republic of Korea have been easing phytosanitary regulations for citrus imports, the US appears to be moving in the opposite direction.

27. Overall, the UR has not had to date a significant effect on world fresh citrus trade. There has been not a major change in EC’s imports of citrus despite the change in its import regime because under the new system entry prices for imports are fixed at similar levels to those of former reference prices (except for oranges, where the entry price was established at a higher level than the former reference price). EC tariffs on citrus remain relatively high for countries not enjoying preferential access. Reduced US tariffs have had no major impact on the FCOJ market so far, as “new” groves planted in the State of Florida to replace those lost by freezes in the mid-1980s have led to record crops in recent seasons, stabilizing output and the demand for imports.

Tropical Beverages

28. The volumes of coffee production and trade in 1996-01 were above the 1990-95 levels and prices have been falling sharply since 1998 when prices reached their lowest level since 1973 in nominal terms. Similarly, world production and trade of cocoa during 1996-01 were above 1990-95 levels, and prices have also been under a strongly declining trend since 1999, reaching a three decade low in 2000 in nominal terms, before improving in 2001 with a decline in global production and stock levels. Global tea production and trade in 1996-01 were above the 1990-95 levels. Prices for tea have been relatively strong compared to the other two tropical beverages.

29. The impact of the URAA for trade in coffee beans, cocoa and tea has been minimal, as tariff and non-tariff restrictions in major markets for these commodities are generally minimal or zero. However, in the cocoa sector, tariff escalation was reduced in the post UR period, having some impact on trade. Price declines for coffee and cocoa have been due to other market factors. For coffee (robustas and Brazilian natural arabicas) expansion of area in Vietnam and the devaluation of Brazilian Real, are two prime factors that have led to severe price declines. The 20 percent export retention scheme of the Association of Coffee Producing Countries (ACPC) failed to prevent the price decline as producing countries found the storage costs too high and reneged on their withdrawal commitments. Another scheme has been introduced by the International Coffee Organization (ICO) which aims to remove low quality coffees from the world market and may lead to increased prices.

Agricultural Raw Materials

30. Global annual production of cotton and rubber increased respectively by 4 percent and 21 percent in 1996-01 compared to 1990-95, while jute production declined marginally. Trade in these raw materials all increased. After a short-lived spike up in the 1995-96 season, prices for many raw materials touched record lows in 2001 or early 2002. The emergence of new low-cost producers, over expansion of production, weak import demand due to the slowdown of economic growth and cyclical factors associated with high levels of production and an accumulation of stocks have been largely responsible for record low prices of cotton, rubber, jute and lower prices for hides and skins.

31. Various domestic support measures and export subsidies used in particular by developed countries have remained at very high levels under the AoA, in general resulting in over-supply and depressed world market prices. Cotton has been cited widely as an example. Other raw materials such as hard fibres and jute are largely produced in developing countries where domestic support of production is insignificant. Several developing rubber producing countries tried to use price measures to support farmers’ incomes but could not continue largely due to government budget constraints.

32. Many agricultural raw materials are generally traded with few tariff restrictions. Cotton, rubber, hides and skins, as well as natural fibres and jute have not been subject directly to any significant market access difficulties. However, tariff escalation remains high on processed products such as textiles and leather products. The Agreement on Textiles and Clothing (ATC) has been expected to result in a considerably increased trade in textiles and associated changes to the geographical pattern of trade in cotton. However, developed countries such as EU and the United States have left the elimination of the remaining 60-80 percent of restricted imports “back-loaded” for the final stage of full implementation by 2005. Tariffs have been reduced on some leather products, particularly footwear, and this is likely to affect the pattern of trade for raw hides and skins. Jute was not included in the AoA and any changes occurring to the jute industry because of the UR were expected to be mostly those associated with improved access for synthetic fibres as a result of the implementation of the ATC.

33. Thus, there has been no obvious evidence to suggest that the implementation of UR agreements have affected world raw material market significantly, particularly relative to other changing market developments. However, products manufactured from these materials may be affected to some extent by the implementation of UR agreements, and this indirect effect on markets may be more significant.

IV. LOOKING FOR STRUCTURAL CHANGE IN COMMODITY PRICE BEHAVIOUR

1. Characteristics of price movements may help describe market functioning. Changes in level, trend, cyclical and irregular components of price movements may signal improvement or deterioration in the market’s ability to resolve supply and demand shifts or shocks. This said, any attempt to isolate changes due to the implementation of URAA is very difficult, particularly given that its full implementation was complete only for developed countries in 2000, and the significance of other market developments during the period.

2. Basic descriptive statistics for nominal international commodity prices are provided in Tables 1 and 2, and the charts or real price movements in Figure 1. Generally, prices declined during the 1996-01 period compared to 1990-95, with only those of 6 of 18 major commodity groups increasing in nominal terms. The monthly price variability of half of those shown increased during the period. These traditional statistics are not necessarily the only way of measuring price variability nor do they rigorously describe changes in market responses.

3. Recent analyses of changes in commodity price behaviour over a long term period point to some interesting, if somewhat inconclusive findings. A paper² prepared by the Commodities and Trade Division, FAO (2002), indicated that monthly nominal prices increased in the 1980s, and decreased in the 1990s, while real prices fell in both the 1980s and 1990s. Variability declined continuously in these two decades relative to the 1970s, though the decline in nominal price variability was less pronounced in the 1990s compared to the 1980s. For real prices, variability declined markedly over the full period³. The paper also examined the issue of structural change in behaviour, concluding that the year 1988 corresponded to a common structural “level” or persistent break for a number of important commodities. Table 3 outlines these findings for selected commodities. Further analysis of these structural breaks for the cereal markets showed that the trend components of nominal and particularly real prices and variability surrounding these have decreased in the 1990s.

4. Volatility models of international price behaviour have been estimated for 15 commodities⁴ using monthly real price data for the 1990 to 2001 period, while testing for multiple structural breaks in both the level and variability of each series. The results are presented in Table 4. These suggest the existence of a structural change in real price levels during the period before and at the end of implementation of the URAA in developed countries. For wheat, sugar, bananas and bovine meat, volatility has declined since the start of URAA implementation, while for oilseeds, pigmeat and poultry, it increased. The estimated models also indicate that market liquidity/flexibility may have increased for certain commodities. Such results need further study as more observations in the post URAA period become available.

5. Studies of the linkage of URAA to changes in prices and price behaviour inconclusive given that full implementation in developed countries was completed only in 2000, and will not be completed in developing countries until 2004. The fact that both observation of commodity experts and rigorous statistical tests remain inconclusive supports the general conclusion that, to date, the effects of URAA implementation on markets have been obscured by more prominent market developments.

Table 1: Average world production, trade and prices for agricultural commodities in 1990-95 and 1996-01

		Production	Trade	Stocks	Prices 1
		million tonnes			US$ /tonne, nominal
Wheat 2	1990-95	559	102	244	155
	1996-01	593	104	237	135
Coarse Grains 2	1990-95	846	92	253	115
	1996-01	902	100	242	102
Rice (milled)	1990-95	356	16	152	288
	1996-01	394	24	157	270
Sugar	1990-95	113	30	53	286
	1996-01	129	37	67	236
Fats and Oils	1990-95	47.8	18.1	6.0	508
	1996-01	60.2	26.4	11.3	477
Oilmeals	1990-95	125.4	59.7	14.5	200
	1996-01	159.9	81.7	20.6	206
Bovine meat	1990-95	51.8	4.6	1.4	3 439
	1996-01	58.5	5.3	1.6	2 770
Pigmeat	1990-95	71.3	1.8	1.1	3 124
	1996-01	86.0	3.1	1.5	3 029
Poultry	1990-95	44.9	2.8	0.4	1 466
	1996-01	63.5	6.5	0.8	1 192
Ovine meat	1990-95	9.0	0.6	0.2	2 134
	1996-01	10.9	0.7	0.3	2 807
Milk	1990-95	534.7	29.5		1 542
	1996-01	563.4	35.6		1 675
Coffee	1990-95	5.5	4.5		1 933
	1996-01	6.5	5.1		2 046
Cocoa	1990-95	2.5	1.8		1 252
	1996-01	2.8	2.1		1 311
Tea	1990-95	2.5	1.1		1.6
	1996-01	2.9	1.3		1.8
Bananas	1990-95	52.1	11.0		648
	1996-01	62.4	13.9		585
Jute	1990-95	3.2	0.3	0.6	342
	1996-01	3.1	0.4	0.7	317
Cotton	1990-95	18.9	5.8	8.0	1 670
	1996-01	19.7	5.9	10.0	1 327
Rubber	1990-95	5.5	4.1	0.5	1 117
	1996-01	6.7	4.7	0.7	916

^a/ Soybean oil ^b/ Soybean meal ^c/ SMP

¹ Wheat HRW No.2; coarse grains maize US yellow No.2; milled rice Thai 100%; sugar raw ISA.

² Trade and prices for wheat and coarse grains are on a July/June basis.

Table 2: Coefficients of variation of monthly nominal prices (percent)^*

	Average 1990-95	Average 1996-01
Wheat (HRW2)	10.1	17.3
Maize (USYellow2)	9.8	15.8
Rice (Thai 100)	7.0	13.7
Rice (Thai A1)	12.6	12.0
White sugar	10.0	18.7
Raw sugar (ISA)	10.9	18.0
Soybean oil	11.4	13.1
Palm oil	17.7	13.9
Sunflower oil	11.7	9.4
Rapeseed oil	13.0	12.3
Skim Milk Powder	8.5	8.8
Whole Milk Powder	8.0	7.0
Butter	9.2	11.0
Bovine	3.8	3.9
Lamb/mutton	5.3	4.1
Pork	4.3	8.8
Poultry	2.9	12.6
Coffee	29.0	18.3
Cocoa	8.7	12.4
Tea	18.9	15.4
Cotton	9.0	7.8
Rubber	7.9	8.0
Jute	13.8	9.5
Hides and skins	4.8	5.3

*The coefficient of variation (COV) is calculated as follows:

COV = [ (Σ(monthly price- monthly average price)²/number of months)^1/2x100]/monthly average price.

Table 3: Probable structural changes for selected (real) commodity prices 1970 - 2000

Commodity	Dates
	Level Changes	Additive Changes
Tea	1983
Jute	1974
Cocoa	1981
Sugar		1974
Bananas
Maize	1988	1981
Wheat	1973, 1988
Rice	1996
Soybean	1973, 1988	1988
Rapeseed	1988
Break dates were significant at the 1 % level. Additive changes refer to one time break and level changes refer to changes that persist over time. Source: Commodity Price Developments since the 1970s, FAO (2002)

Table 4: Probable structural changes in level and volatility

Figure 1 Real Monthly Prices (in natural logarithms)

Figure 1 (Continued) Real Monthly Prices (in natural logarithms)

¹ This paper updates and extends a previous document which was provided to the FAO Symposium on Agriculture, Trade and Food Security: Issues and Options in the Forthcoming WTO Negotiations from the Perspective of Developing Countries, held on 23-24 September 1999 in Geneva As such the paper reassesses developments in agricultural markets in light of updated information and analysis.

² “Commodity Price Developments since the 1970’s”, forthcoming publication prepared for the Consultation on Agricultural Commodity Prices, 25-26 March, 2002, Rome.

³ It has been argued that the robust decline in both real levels and variability may be a function of the deflator used in the analysis, see R.A. Mundell (2002) Commodity Prices, Exchange Rates, and the International Monetary System,in Consulation on Agricultural Commodity Price Problems, FAO forthcoming.

⁴ These were are ëxponential generalized autoregressive conditional heteroscedastic (EGARCH) models.