COMMODITY I s V4o 3 X ) IMARKETS Vol.GIV o X ANDTHE DEVELOPING COUNTRIES November Beyond East Asia-the impact on Africa Oil prices keep falling Beverage prices drop 10.5% Metals prices down 3.7% jfffA I~~~~ 1b ! I 1111 11 s~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~ l % . l IIo.. : CONTENTS AND SUMMARY To our readers: This is our last issue of Commodities Markets and the Developing Countries. We thank you for your continued readership and support. InJanuary, we will launch our new quarterly publication, Global Commodity Markets. It will include more comprehen- sive coverage on each commodity as well as several important new features. It will be published in a more timely manner, be available in electronic form, and include a monthly update. The new features will include a review of the global macroeco- nomic situation, coverage of ocean freight rates, regional commodity price indexes, and futures prices for some commodities. We will continue to present a Special Feature on issues of importance to commodity markets, such as the EastAsian finan- cial crisis. Global Commodity Markets will feature a two-page design for each commodity that will provide a blend of historical and current information, as well als price fore- casts. To provide more timely and up-to-date coverage of commodity markets, we will publish a monthly update that will include the most recent prices as well as a review of major developments during the month. The monthly update will be available to subscribers in electronic form. Our analysis will continue to focus on recent developments and their implication for nearby and long-term price trends. Current subscribers to Commodity Markets and the Developing Countries will receive the quarterly report for the balance of their subscription. New subscribers will be able to receive both print and electronic versions of the quarterly report and the electronic version of the monthly update. Ordering information is included inside the back cover of this report. Sincerely, Donald Mitchell Senior Economist and Editor Commodity Markets and the Developing Countries 2 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES CONTENTS AND SUMMARY SUMMARY PAGE 4 exports; India is set to triple its imports. Commodity - prices continue SPECIAL FEATURE GRAINS to decline. * IMPLICATIONS OF THE EAST ASIAN CRISIS U GRAINS PAGE 18 Energy prices FOR SUB-SAHARAN AFRICA PAGE 6 World grain balances are tighter than previ- are down 2.6% Sub-SaharanAfrican cotntries have avoided the ously thought. and nonenergy severe impacts of the East Asian financial crisis. U MAIZE PAGE 18 prices 5.7% in Prices fall to the lowest levels of the decade on the third ENERGY news of higher production. quarter. * COAL PAGE 9 U RICE PAGE 19 International prices continue to fall on weak World rice stocks fall to a 25-year low as a per- demand and a steady rise in supply. centage of use. Higher prices seem likely. * NATURAL GAS PAGE 9 U WHEAT PAGE 19 US natural gas prices fall on weak demand and World wheat prices should increase over the high stocks. Newpipeline capacity from Canada next few months as market sentiment shifts its should keep winter prices from spiking. focus from Asia. * PETROLEUM PAGE 10 OPEC has nearly met its production targets, OTHER FOOD but stocks remain large.. U BANANAS PAGE 20 Ecuadorian exports decline by almost one- BEVERAGES fifth for the year to date. * COCOA PAGE 14 U SHRIMP PAGE 20 Favorable weather in W/est Africa gives pro- Strong yen strengthens demand in Japan. duction a boost. Abundant supplies weaken prices in the US * COFFEE PAGE 14 and Europe. CHANGE IN QUARTERLY A bumper crop in Brazil pressures arabica E SUGAR PAGE 21 PRICES, 2Q98 TO 3Q98 prices. Robusta prices remain steady. Sugar stocks build for the fourth consecutive Percent * TEA PAGE 15 year. Prospects for price recovery seem slim. Energy -2.6 Nonenergy -5.7 Prices decline in Calcutta and Colombo as Total agriculture -6.5 Russian importers reduce their purchases fol- AGRICULTURAL RAW Beverages -10.5 lowing devaluation of the ruble. MATERIALS Tota food -5.4 Fats and oils -5.9 U COTTON PAGE 21 Grains 6.8 FOOD Prices continue to fall on weak demand, and the Other foods -3.2 FATS AND OILS prospectsforarecoveryintheshorttermareslim. Raw materials -2.8 T mber -3.4 * FATS AND OILS PAGE 1 6 * RUBBER PAGE 22 Fertilizers -0.3 The prices of most oils remain relatively firm. Prices deteriorate even further. Malaysia and Metals and minerals -3.7 Global production to reach a record. Thailand withdraw from the International * COCONUT OIL PAGE 16 Natural Rubber Organization. Production declines from 3.42 million to 2.83 * TIMBER PAGE 23 million tons. Ending stocks reach their low- Southeast Asian hardwood logs supply is est level in five years. Prices remain firm. becoming increasingly scarce due to low log- * PALM OIL PAGE 17 ging operations. Still, demand is weak and Production reaches new highs. Indonesia's prices are relatively unchanged. palm oil yields deteriorate, as they feel El Nifio's delayed effects. FERTILIZERS * SOYBEAN OIL PAGE 17 U FERTILIZERS PAGE 23 Exceptionally high yields result in record pro- Prices remain relatively high despite the sharp duction. China will absorb a third of world downturn in grain prices. NOVEMBER 1 998 3 CONTENTS AND SUMMARY * POTASSIUM CHLORIDE PAGE 24 depressed well into next year barring an extra- Prices remain steady. Production cutbacks are ordinary surge in demand or a major disrup- announced. tion in supplies. * PHOSPHATES PAGE 24 Beverages prices were down 10.5% over the Potential larger imports by China may sup- previous quarter and down 21.5% from the port prices in the near term. first quarter of 1998. The decline was con- * UREA PAGE 25 centrated in arabica coffee following a large Urea prices continue to fall as production South American crop, and in tea due to higher increases despite weak demand. production in major exporting countries. Kenya and Sri Lanka, the two largest tea METALS AND MINERALS exporters, both had large crops and strong * ALUMINUM PAGE 25 exports. Weak tea imports to the Russian Prices fall 3% in the third quarter on sagging Federation, due to the financial turmoil in demand and rising stocks. Production con- that country, contributed to the fall in tea tinues to outstrip demand. prices. Robusta coffee prices remained firm * COPPER PAGE 26 because of the reduced procluction in Asia Copper prices fall 5% in the third quarter. and Africa because of El Nifio. DemandremainsstronginNorthAmericaand Food prices were down more than 5% Europe, but surplus production causes LME over the previous quarter as grains, soybeans, stocks to swell by 66%. and sugar all tumbled. Grain production esti- * GOLD PAGE 27 mates were lowered, and prices seem to be The average price falls 4% in the third quarter, below sustainable levels, but prices have yet and gold trades within the narrow range. to show strong signs of recovery. Soybean * IRON ORE AND STEEL PAGE 28 prices fell in response to the second con- Steel prices fall 7% during the third quarter secutive year of large world production and on weakening demand, rising stocks, and sur- rising stocks. Weak maize prices contributed plus production. to the decline in soymeal prices and the over- all weakness in soybean prices. Sugar prices COMMODITY PRICES fell to 10-year lows, and there is little reason * COMMODITY PRICE INDICES PAGE 5 to expect prices to rally soonI. Large stocks I COMMODITY PRICE OUTLOOK PAGE 30 and a steady flow of sugar exports are expected over the next few months from SUMMARY Australia, Brazil, and South Africa. This will Commodityexportersworldwide have been be met by weak demand from the tradition- hit hard by the more than year-long plunge ally large importers as such as China, India, in commodity prices, which has seen energy and the Russian Federation. prices fall 29.2% and nonenergy prices fall Metals prices continued to fall, ending the 24.4% since the second quarter of 1997. The quarter down 3.7%. Asian demand is down. declines seem to go beyond what can be Aluminum and copper demand are both explained by the fundamentals of demand expected to fall 10% in Japan in 1998 com- and supply, wwhich suggests either a major pared with 1997. The Republic of Korea has change in expectations or a case of over- seen an even more severe decline, with cop- shooting of prices. per demand down an estimated 20%. Precious Energy prices face the familiar situation of metals have also seen demand fall, with gold weakdemandandrisinginventories. OPECpro- demand down 28% in the first half of 1998 ducers have not yet cut production enough to compared with the year-earlier level. India balance the market, which leaves a surplus at remains a bright spot for gold as demand is current prices. Prices are expected to remain up 15% in 1998. 4 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES COMMODITY PRICE INDICES FIGURE 1. WEIGHTED INDEX OF PRIMARY COMMODITY PRICES FOR LOW- AND MIDDLE-INCOME ECONOMIES ENERGY (CRUDE OIIL) NONENERGY COMMODITIES Index. current US dollars (I 990= 100) Index: current US dollars (1990=100) 150O130 120~~~~~~~~~~~~~~~~2 120 60 90 30 80 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 TOTAL FOOD METALS AND MINERALS Index: current US dollars (I1990=100) Index: currenr US dollars (1990=100) 140 140 70 8,384 8586 8788 8990 919293 94 95 969798 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 TABLE 1. WEIGHTED INDEX OF PRIMARY COMMODITY PRICES FOR LOW- AND MIDDLE-INCOME ECONOMIES IN CURRENT D)OLLARS (1990= 100) Nonenergy Metals rommod- Total agri- Total Fats Otrer Total raw and Energy ities culture Beverages foor and oils Grains faod materals Tmber Fertilizers minerals (100)n (100) (69.1) (16.9) (29.4) (10,1) (6.91) (12.4) (22.8) (9.3) (2.7) (28.2) Annual [ 3995 75.06 1 22.20 13 .31 ISI. 9 16.90 1 36.56 120.38 98.84 1 35.22 [ 39.54 03.59 10 1.6 1.996 89.25 I 1 5.09 125.48 126.47 123.63 1 47.02 140.58 94.97 1 27.1 2 39.49 1 19.8 1 89.1 1997 83.80 1 7.64 128.72 71.04 .6.08 147.74 12.11 92.38 1 13.73 125.83 1 19.73 90,24 Quarterly 1997Q3 81.14 1 15.93 125.94 173.56 1 10.24 138.44 105.65 89.72 1 10.99 23.97 1 16.44 91.30 1997Q4 81.91 109.39 1 19.34 162.12 1 12.04 146.29 103.62 88.73 97.13 98.69 1 18.20 84.08 1 998Q I 6 I.48 105.9 I 116.38 64.31 I 09.. 2 140.0 05.66 85.76 90.32 91.90 12 .82 78.66 1 998Q2 58.38 100.98 [09.68 .144.23 1 06.92 32.46 104.54 87.33 87.72 88.82 123.43 77.44 1998Q3 56.85 95.24 102.58 129.02 10 .14 [27.23 98.32 81.36 84.91 86.30 123.02 74.53 Monthly 19975ep 81.56 114.22 124.51 174.23 1110.46 41.16 104.16 88.84 105.88 114.24 1015.68 88.81 1997 Oct 87.59 1 1095 129.95 160.94 111.09 143.66 105.50 87.56 107.12 03.72 I 16.07 86.88 1997 Nav 83.44 109.36 1219.I2 156.442 3.36 I49.4 102.37 90.30 98.95 100.77 1 18.57I 84.54 1997 Dec 74.70 108.26 1 18.96 168.99 [111.68 145.80 102.98 88.63 91.37 91.58 20.02 80.84 1998Jn 65.65 1 05.94 116.31 168.59 110.22 142.00 104.58 87.37 85.51 821.93 211.82 78.96 998 Feb 61.50 107.61 119.08 168.53 1 0.23 141.64 106.35 86.68 93.93 97.14 121.82 78.07 1998 Mar 57.30 104.17 113.75 .55.80 06.89 136.37 06.04 83.22 91.52 96.61 121.82 78.96 1998 Apr 59.05 104.24 1 13.52 152.62 108.77 134.27 I104.69 90.17 90.76 94.79 122.40 79.67 1998 May 61.32 101.38 110.20 145.55 107.60 135.76 105.09 85.96 87.42 87.90 123.67 77.56 1998 jun 54.77 97.33 105.33 134.53 104.37 127.36 [03.83 85.85 84.98 83.75 124.23 75.10 1998Jul 55.51 96.26 103.94 129.33 104.77 128.75 102.39 86.45 84.10 81.31 124.23 74.72 1998 Aug 54.59 94.85 102.18 132.38 99.40 125.40 96.62 79.67 83.45 84.39 123.02 74.14 1998 Sop 60.45 94.60 101.63 125.35 99.25 I27.54 95.94 77.95 87.18 93.19 121.82 74.72 Note: Weighted by average 1987-89 export values for low- ens mrdd e-income econamies. a. Crude oil Inoes. Source: WorHd 3ank Developmenu Prospects Group NOVEMBER 1998 5 SPECIAL FEATURE IMPLICATIONS OF THE TABLE 3. AFRICA'S MINERAL PRODUCTION EAST ASIAN CRISIS FOR Percent Africa's shore of SUB-SAHARAN AFRICA Commodity world production Major producers Plat num 66 South Africa Sub-Saharan Africa is the most commodity- Diamonds 46 Dem. Rep. of Congo, dependent region of the world both in income Botswana, South AfHca and export earnings terms. Though com- Gold 29 South Africa, Ghana, Zimbabwe modities constitute less than one-fifth of world Coal 21 South Africa trade, they constitute three-fourths of Sub- Petroleum 5 Nigeria,AAngola,Gabon, Saharan exports (excluding South Africa). In Cameroon Source: World Bank many cases a single commodity accounts for as much as 10% of GDP-and even more of export earnings (tables 2 and 3). For example, although the effects of the financial crisis, which began Sub-Saharan Africa accounts for 7% of the in EastAsia and later spread to other countries- world's cotton production, its export share is notably Russia and several Latin American coun- 17%-and rising. Sub-Saharan Africa accounts tries. The resultant currency devaluations and for more than two-thirds of global cocoa pro- economic slowdown have contributed to sub- duction (C6te d'Ivoire has a 42% share, and stantial declinesinvirtuallyallcommodityprices. Ghana 12%), about half of robusta coffee pro- For example, betweenJune 199 7 and September duction, one-fourth of tea production, and 5% 1998 the price of timber fell 49%, beverages of oil production. Petroleum accounts for 25% 32%, and petroleum 31 %. of Sub-Saharan Africa's merchandise exports, Given that a global economic slowdown is while making up just 9% of world oil exports. now a reality (world GDP growth is expected Sub-Saharan Africa is also the poorest to slow to 1.9% in 1998, down from 3.2% in region of the world. Excluding South Africa 1997, with little if any recovery in 1999), the and Nigeria, it accounts for only 1% of the implications for Africa could be more severe world's GDP, yet it has 10% ofthe world's pop- than initially anticipated and extend beyond ulation-one-tenth of the world's population the direct trade effects. generates only one one-hundredth of the Apart from the effects of the direct trade world's income. Economic growth in Africa with East Asia, there are a number of other also lags by a substantial margin. In the past ways in which African countries could be 12 years while the world's per capita income affectedbythe crisis, including areduction in grew at an average annual rate of 1.1%, Sub- financial flows, loss of competitiveness, and Saharan Africa's shrank 0.6% a year. deterioration in the terms of trade. Africa's dependence on a relatively small number of commodities in combination with TRADE WITH EAST ASIA its low income makes it especially vulnerable While Sub-Saharan African trade with East in periods of low commodity prices. This vul- Asia varies across countries, overall it is modest nerability is particularly acute now, because of (table 4). East Asia accounts for one-third of Zambia's total merchandise exports and slightly TABLE 2. AFRICA'S COMMODITY EXPORTS more than a quarter ofMali's exports. After that Percent the share falls to 16% for Ethiopia and then to Africos share 10% for South Africa, Togo, and Zimbabwe. For Commodity of world exports Mojor exporters the other Sub-Saharan countries, East Asia Cocoa 69 Ghana, Cote d'lvoire accounts for less than 10%-and as little as 0.6% Coffee (robusta) 46 Uganda, C6te dlvoire for Angola and 0.3% of Rwanda. Tea 25 Kenya, Malawi Cotton 17 Mali, Benin On the import side too, only Ethiopia, Mali, Source: World Bank and Zambia exhibit concentration in a few 6 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES SPECIAL FEATURE TABLE 4. AFRICA'S AVERAGE ANNUAL EXPORTS TO EAST ASIA, 1995-97 Percentage shore of exports Export Hong volue jopon Thailond Indonesia Malaysia Philippines Kong Singapore Total (US$ doliars) Zambia 14.7 10.9 0.8 3.3 0.1 0.3 3.2 33.3 1,040 Mall 0.8 20.5 1.6 2.3 0.5 25.7 271 Ethiopia I 1.5 0.4 0.5 0.9 0.1 2.4 15.8 494 South Africa 5.4 0.6 0.6 0.7 0.2 1.8 1.1 10.4 30,627 TogO 2.5 1.0 1.8 2.9 0.3 2.1 10.6 388 Zimbabwe 7.0 0.6 0.7 0.4 0.7 0.5 0.5 10.4 2,280 Malawi 6.7 0.1 6.8 493 Congo, Dem. Rep. 4R 0.3 0.2 0.2 5.2 1,445 Gabon 3.9 0.1 0.1 0.1 0.5 0.4 5.1 2,813 Cameroon 1.- 1.5 0.2 0.4 0.1 0.4 0.3 4.2 2,351 Mauritius 1.0 0.1 0. 0.7 0.9 2.8 1,526 Sierra Leone 1.1 1.0 0.1 0.4 2.6 220 Nigeria 1 .C 0.1 0.9 0.2 0.3 2.5 14,660 Congo, Rep. 0. i 1.9 0.1 2.3 1,609 Central African Republic 0.1 0.2 0.6 0.1 0.1 1.1 239 Angola 0.^< 0.2 0.1 0.6 4,073 Rwanda 0.1 0.2 0.3 132 Source: World Bank, countries. Japan and Thailand account for resource flows to Africa of almost $21 million 15% and 11% of Zambia's merchandise in 1997, official development assistance exports, Thailand accolnts for 21 % of Mali's accounted for $13 million. South Africa exports, and Japan accounts for 12% of absorbed about half of the $8 million in pri- Ethiopia's exports. Therefore, apart from vate flows, so only $4 billion went to the rest these three exporting countries, the direct of Sub-Saharan Africa. Private flows are trade effects from the East Asian crisis are expected to decline, but, except for South not very important. Africa, the impact will be blunted by the recent debt rescheduling (for which a num- SMALLER FINANCIAL FLOWS ber of African countries are eligible). Financial flows to Africa go mainly to com- modity-related activities, especially in the Loss OF COMPETITIVENESS metal and mineral subsectors. Although the The currency devaluation of the East Asian region's reliance on private financial flows economies made their products less expen- has increased markedly in recent years, offi- sive in dollar terms and hence increased their cial finance still dominates. For example, total competitiveness. Inevitably, other commodity private flows averaged only $0.3 billion in producing colntries devalued their own cur- 1990-93, whereas they averaged $6.8 billion rencies in order to stay competitive. The cur- in 1994/97. Over the same periods, official rencies of the five East Asian countries (upper development assistance averaged$16billion part of figure 2) depreciated an average of and $14 billion (table 5). Of aggregate net 36% in real terms. Other things being equal, TABLE 5. AGGREGATE NET RESOURCE FLOWS (LONG-TERM) TO SUB-SAHARAN AFRICA, 1990-97 Billions of US dollars 1990 1991 1992 1993 1994 1995 1996 1997 Official development inance 17.0 15.3 6.3 14.8 15.7 14.4 12.8 12.7 Official developmentassistance 16.6 15.0 15.7 14.5 16.2 15.3 14.4 13.9 Other Nonconcessional loans 0.4 0.3 0.6 0.3 -0.5 -0.9 -1.5 -1.2 Total private flows 0.2 0.8 0.4 -0.2 4.8 9.7 4.4 8.1 Source: World Bank NOVEMBER 1998 7 SPECIAL FEATURE the dollar price of their products was thus one- FIGURE 2. REAL EFFECTIVE EXCHANGE RATES third less than before the crisis. Over the same (JUNE 1997-SEPTEMBER 1998) Percentage change time period, the currencies of five important Indonesia chng commodity producing countries-Australia, Korea, Rep. of Philipp nes Brazil, Chile, Colombia, Russia-depreciated Malaysia an average of 21% (middle part of figure 2), Russia s a Coombea to a large extent matching the competitive Austraiia gains of East Asia. Bhil e The picture for Sub-Saharan African com- Zimbabw. modity producers is mixed, however. Some Malawi Zamb a countries (Malawi, Uganda, Zimbabwe) Uganda South Afr ca improved their competitiveness through cur- Congo, DR rency devaluations that led to substantial Thaiand Cameroon depreciations. Others did not. And some Nigeria Gabon countries (Democratic Republic of Congo, Ghana C6te d'lvoire, Ghana, Kenya) experienced CnteodRoipe of substantial currencv appreciations of 10% to Kenya _ _ 30%. -60 -50 40 -30 -20 -IC 0 10 20 30 Source: World Bank TERMS OF TRADE DETERIORATION CAUTIOUS OPTIMISM Terms of trade deterioration in 1998 has Most Sub-Saharan African countries are been substantial for oil-exporting Sub- unlikely to suffer further blows from the Saharan African countries, at more than global economic crisis, largely because of 20%, or 5 times that in the rest of the region their low degree of integration with the global (in 1997 these countries experienced no economy, the currency depreciations in a change in their terms of trade). This trans- number of countries, and the relative lates to a real income decline of almost 7%. strength of their terms of trade. There are The other Sub-Saharan African countries exceptions to this relatively optimistic pic- (including South Africa) are expected to ture, however, including South Africa, whose experience a loss of only 3%. So while these economy is well integrated with the rest of countries receive lower prices for their the world and, therefore, has taken the hard- exports, most of that loss should be balanced est hit, and the oil producers, whose export by the lower prices they pay for imported revenues are falling fast. commodities-especially energy and food. Growth in Sub-Saharan Africa is expected In 1997, Sub-Saharan African countries to exceed 2% in 1998 and 3% in 1999 (itwas (excluding South Africa and the three oil 4.2% in 1996 and 3.5% in 1997). The rela- producers) experienced a terms of trade gain tively high population growth rate (estimated of 7%. Thus, except for the oil producing at around 3%) will, however, be translated to countries, terms of trade losses due to the a decline in per capita income in 1998 and crisis have not been very large. only a very slight increase in 1999. 8 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES ENERGY COAL NATURAL GAS 30 - Oil prices 5650 YEARLY (US dolGrslmt) 2.0 continue to i98 i US thermal, fo.b.Hampton Hj slide down Roads, Norfo!k 3.04 l997 80 85 90 95 2.6% for the (US doilcrlmmbtu) quarter. Spot Henry Hub 4850 Lowslnao. 1984 2.42 APR 1990 = A 00 1998 - 81,9 1 97 t91997 Slit Q4 4 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~SEP 1980 19 1998 1987 1997 INTERNATIONAL PRICES FALL ON OVERSUPPLY US PRICES REMAIN WEAK ON HIGH INVENTORIES International coal prices continued to US natural gas prices fell in the third quar- 61.5 /98 58.4 decline sharply, pulled down by slumping ter on weak demand and high levels of inven- Q1 1998 56\ demand and stcadily rising supply. Currency tories. Prices dipped well below $2 per .3 depreciations in many of the major producing million btus (mmbtu) before spiking above countries have contributed to the excess sup- $2 in September, when hurricane activity in ply by undermining the production response the Gulf caused a temporary shut-in of to lower prices. production. The fall negotiations of 1999 prices between So far this year, domestic gas output is mod- Japanese utilities and major exporters are eratelyhigherandimportsareup3% overlast expected to result in prices well below last year. Demand is 2% lower, however, due to year's benchmark price of $34.50 per metric mild weather in both winter and summer. This ton (mt). Spot prices have been more than has allowed continued large injections into $10 belowthat level thisyear, as buyers increas- storage, which has kept inventories well ahead ingly rely on spot purchases to manage inven- of last year's levels, and has weighed heavily tories and minimize costs. Negotiations on prices. The interruption in US gulf pro- between Japanese steel mills and producers duction in September resulted in lower stor- are also expected to result in lower prices for age injections and briefly took some of the coking coal. The bleak outlook stems from pressure off prices. lower demand forecasts, rising supplies, and But even with the slowdown of injections, falling production costs and currencies. inventories could exceed 3,100 billion cubic Should buyers continue to give up security of feet (bcf) by the end of October, 8% higher supply in favor of more flexible contract terms than a year earlier. As the market moves into and pricing, pressure on prices will build. the heating season, the gradual reduction in US coal prices have fallen much less despite demand for storage will allow prices to move mild summer weather after the early heat wave higher, but the size of the surplus will limit in the south. Demand from Ontario Hydro, fol- any significant price increases. In addition, by lowing shut-down of its nuclear capacity, has the end of this year 1.1 bcf per day of new helped keep prices firm. US coal exporters will export capacity from Canada will be available likely see a decline in international prices next from the Transcanada and Northern Border year as their material becomes less competitive, pipeline expansions. And Transcanada will particularly coking coal. Prices are expected to add another 450 mmcf per day of new capac- decline next year. ity in November 1999. NOVEMBER 1 998 9 ENERGY The outlook for the winter depends PETROLEUM 40 largely on the weather. An early cold start 30 to the heating season would support some- 20 what higher prices, but a spike is unlikely 20,0 80 85 90 95 given the surplus and anticipated increase 1997 \ in imports. Barring a long stretch of extremely cold weather, prices in the first quarter of 1998 are expected to average 138 below $2.50 mmbtu. SEP US demand is expected to be nearly 4% higher in 1998 assuming normal weather, MAR but production is expected to grow by 1% (US odirsbb9 998 t998 and imports by 7.5%. Prices are not expected Sp,,, ,}eJge orB-t to strengthen until seasonal inventories JQtemedrote return to more typical levels, likely in the second half of next year. Even then, aver- PRICES REMAIN LOW ON WEAK DEMAND AND HIGH age annual prices are expected to be simi- INVENTORIES lar to this year's. Petroleum prices declined slightly in the European gas prices continue to fall, third quarter, amid continued weak demand reflecting the lagged indexation of contracts and high inventories. Prices averaged $13.01 to petroleum product prices. The price per barrel (bbl) in the quarter, a third lower declines have been much less than the aver- than the average for 1997. August's average age drop in crude oil prices, however, of $12.49/bbl was the lowest of the year, but because of links to strong product prices prices bounced up to $13.83 in September as (fuel oil and gasoil), as well as time lags and both stocks and OPEC production began to other elements in the contract formulas. recede. However, the supply overhang in the While industrial customers on the continent market is still very large and will take time to are benefiting from lower gas prices, prices dissipate. The direction of prices will depend are lower still in the UK, where market forces largely on the weather and on any reduction alone determine prices. in supplies. OPEC meets in November to con- In October, gas starts flowing through the sider further cutbacks, and Iraqi supplies could 1.93 bcf per day Interconnector pipeline link- be interrupted given its recent uncooperative ing the fully liberalized UK market with the stance with the United Nations weapons heavily regulated continental market. The inspections. With the large surplus, however, initial flow will affect only the margins of the prices are expected to remain depressed well large mainland market, which is dominated into next year, barring any extraordinary by long-term contracts. demand surge or supply disruption. The new EU natural gas directive allows Oil stocks remain high in the main con- large industrial users to choose their own suming markets of North America and suppliers starting 2 years from now, and at Europe. Crude oil stocks in August were above least a third of the marketis to be liberalized year-earlierlevelsby9% and 15% respectively within 10 years. Propelled by the momen- in these two regions. Petroleum product stocks tum of competition, however, a larger share also remain high, particularly in North of the market is expected to be liberalized America where inventories are 10% higher over that period. For example, with grow- than last year. ing gas-to-gas competition, new indexation In the US, crude oil stocks declined sig- formulas may emerge and contracts may nificantlyin September, contributing to higher shorten. prices, but started to rise markedly in October, 10 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES ENERGY partlyduetoalargere(ductioninrefineryruns. TABLE 6. OPEC CRUDE OIL PRODUCTION Gasoline stocks finally fell back within a more AND QUOTAS Millions of barrels per doy typical seasonal range in early October, albeit 1Q98 2Q98 3Q98 Quota 3Q98-Quota at the high end of the range. Middle distil- Alei 08 0X8 0 0 0.002 late stocks, which have been well above the Indonesia 1.31 1.27 1.29 1.280 0.010 ran 3.58 3.75 3.44 3.293 0, 147 typical range since last winter, are moving Iraq 1.58 2.05 2.4 .650 0. 760 closer to "normal" but are still high, particu- Kjwaita 1.94 1.81 1.74 1.980 -0.240 larly on the East Coast. The movement in heat- Libya 1.46 1.42 134 1 323 0 017 Neutral Zone 0.52 0.58 0.55 ingoil stockswilllargelydepend on the severity Nigeria 2.26 2.19 2.02 2.033 -0.013 of winter weather. Qatar 0.71 0.68 0.63 0.650 -0.020 Saudi Arabia' 8.43 8. 17 7.82 8.023 -0.203 Unlike the US, cru(de oil stocks in Europe UAE 2.45 2.31 2.20 2.157 0.043 andjapan appeared to have moved higher in Venezuela 3.36 3.18 2.97 2.845 0,125 Total crude 28.47 28.23 27.20 26.022 1.178 September, as did pro(luct stocks in Japan. Excluding Iraq 26.89 26.1 8 24.79 24.372 0.418 On a global basis, inventories and miscel- NGLs0 2.82 2.84 2.91 laneous rose only 0.3 mb/d in the third quar- Total OPEC 31.29 31.06 30.12 ter because of the reduction in OPEC supplies. a. Quota includes half share of Neutral Zone. b. Natura. gas liquids. While this is much lower than normal,it uagsqid While this is much lower than normal, it Source. Internatioral Energy Agency and OPECNA. nonetheless did little to reduce the supply overhang in the market. Stocks had previously Offsetting these declines was a steady rise in posted an abnormal build of 1.6 mb/d in the production from Iraq. Production in the third first quarter and a large 3.3 mb/d gain in the quarter averaged 2.41 mb/d, which is 0.76 second quarter. mb/d above its assessed February level of 1.65 OPEC production, excluding Iraq, con- mb/d. In September the country produced tinues to fall as the organization gets closer just shy of 2.5 mb/d, near its present capacity. to its agreed targets. OPEC set a production Iraq's future production is again in question target of 24.37 mb/d for the year commenc- following its decision not to cooperate with ingJuly 1998, which is 2.6 million barrels per United Nations weapons inspections. day (mb/d) lower than the February base level Non-OPEC production fell 0.5 mb/d in the from which cuts are made. Production in the third quarter, with virtually all of the decline third quarter averaged 24.79 mb/d, which was occurring in the OECD (table 7). Norway's out- only 0.4 mb/d above target and more than 2.0 put fell 0.3 mb/d due to summer maintenance mb/d lower than in February. Many countries programs, which were particularly heavy in are near their assigned levels, with Iran (0.15 mb/d) and Venezuela (0.13 mb/d) the main TABLE 7. NON-OPEC OIL SUPPLY overproducers. Saudi Arabia and Kuwait were Millons of borrels per dGy Change over by a combined 0.1 Inb/d including their 1996 /997 2Q98 3Q98 2Q98 to 3Q98 equal shares of Neutral Zone output (table 6). Unites States 8.59 8.66 8.48 8.26 -0.22 Production in Nigeria has been affected by Mexico 3.28 3.41 3.54 3.48 -0.06 Canada 2.46 2.57 2.64 2.67 0.03 political unrest, which forced the temporary United Kingdom 2.81 2.74 2.74 2.76 0.02 shut-in of a portion of its output in recent Norway 3.23 3.28 3.19 2.89 -0.30 Other OECD 1.35 1.41 1.41 1.37 -0.04 months. Latin America 3.25 3.43 3.64 3.70 0.06 In September OPEC production averaged Africa 2.64 2.72 2.72 2.74 0.02 Middle East 1.93 1.89 1.89 1.86 -0.03 24.44 mb/d, less than 0. 1 mb/d above target. China 3.12 3.19 3.20 3.17 -0.03 SaudiArabia's outputdropped 0.1 mb/dbelow OtherAsia 2.11 2.11 2.11 2.14 0.03 FSU 7.07 7.20 7.21 7.21 0.00 target, including its production from the Eastern Europe 0.21 0.21 0.20 0.20 0.00 Neutral Zone. Iran and Venezuela continued Processing ga n 1.52 1.57 1.64 1.64 0.00 Total non-OPEC 43.57 44.40 44.60 44.09 -0.51 to reduce their production, but remained - Note: Includes natural gas liquids, nonconvent onal, and other supply sources. above quota by a combined 0.14 mb/d. Source. Jntemational Energy Agency NOVEMBER 1998 11 ENERGY TABLE 8. OIL CONSUMPTION Millions of barrels per doy Percentoge change FSU and Developing FSU and Developing OECD Eastern Europe countries Total OECD Eastem Europe countoes Totai 1990 41.5 9.4 15.4 66.3 0.6 -3.4 3.0 0.6 1991 41.9 9.0 15.9 66.8 0.8 -4.6 3.5 0.7 1992 42.9 7.8 16.7 67.4 2.3 -13.6 5.4 0.9 1993 43.2 6.6 18.1 67.8 0.8 -15.7 7.9 0.7 1994 44.4 5.5 18.7 68.6 2.7 -15.5 3.6 1.2 1995 44.9 5.5 19.8 70.1 .1 -1.6 5.6 2.1 1996 45.9 5.0 20.8 71.8 2.3 -7.5 5.5 2.4 1997 46.6 5.2 21.9 73.8 1.6 3.4 5.2 2.8 1 Q97 46.9 5.1 21.6 73.6 -0.6 -5.6 5.9 0.8 2Q97 45.4 5.2 21.6 72.2 3.0 6.1 3.3 3.3 3Q97 46.3 5.2 22.0 73.5 2.7 6.1 5.6 3.8 4Q97 47.9 5.4 22.4 75.7 1.5 10.2 S.' 3.2 1 Q98 47.1 5.5 22.3 74.9 0.3 7.8 3.3 1.8 2Q98 45.0 5.0 22.4 72.4 -a9 -3.8 3.7 0.3 3Q98 46.6 4.9 22.4 73.9 0.6 5.8 2.0 0.6 Source: International Energy Agency and World Bank August when production fell more than 0.7 in the Republic of Korea and more than 2% mb/d. Norwegian production is likely to fall in Japan. this year for the first time in 17 years because Non-OECD demand is estimated to have of extended maintenance shut-ins, technical increasedbyonlyO.1 mb/dor0.6%.Thiscom- problems, and delays in the start-up of new fields. pareswith growth of 5% for all of 1997. Apparent In addition, the government has indicated that demand in the countries of the former Soviet it will consider extending the time frame for Union (FSU) is estimated to have declined by its agreed 0.1 mb/d reduction in production in 6% because of the economic crisis that erupted support of OPEC's efforts to reduce the surplus during the quarter. There was moderate growth and raise prices. US production fell 0.2 mb/d, in all other regions, except in Asia where with half of the decline in natural gas liquids. demand is estimated to have shown little or no World oil demand rose 0.4 mb/d, or 0.6%, increase. China is expected to experience little following growth ofjust 0.2 mb/d in the sec- increase in the second half of the year, in part ond quarter (table 8). OECD oil demand rose because of the large growth a year earlier, but 0.7%,withmoderategrowthinNorthAmerica also because of the economic slowdown and and Europe partly offset by a decrease of 8% severe flooding in the third quarter. Elsewhere, TABLE 9. WORLD PETROLEUM DEMAND AND SUPPLY Millions of barreis per day 1 996 1 997 1 Q98 2Q98 3Q98 4Q98 1998 IQ99 2Q99 3Q99 4Q99 1 999 Demond OECD 45.9 46.6 47.1 45.0 46.6 48.6 46.8 48.0 45.9 47.2 49.3 47.6 FSU 4,3 4.4 4.6 4.2 4.2 4.5 4.4 4.6 4.3 4.3 4.6 4.4 Other 21.6 22.8 23.2 23.2 23.1 23.8 23.3 24.0 23.7 23.7 24.5 24.0 Total 71.8 73.8 74.9 72.4 73.9 76.9 74.5 76.6 73.9 75.2 78.4 76.0 Supply OECD 21.7 22.1 22.5 22.0 21.4 22.4 22.1 22.8 22.5 22.5 23.3 22.8 FSU 7.1 7.2 7.3 7.2 7.2 7.2 7.2 7.2 7.2 7.2 7.2 7.2 Other, 28.8 29.3 29.8 -29.2 -28.6 -29.6 -29.3 -30.0 -29.7 --29.7 -30.5 -30.0 OPECb 28.5 30.0 31.3 31.1 30.1 29.9 30.0 30.0 30.0 30.0 30.0 30.0 Totat 72.0 74.4 76.5 75.7 74.2 29.9 30.0 30.0 30.0 30. 30.0 30.0 Stock change and miscellaneous OECD 0.0 0.3 -0.2 1.7 Floating/transit -0.. 0. 1 0.2 0.2 Other/miscellaneous 0.3 0.2 1.6 1.4 Total 0.2 0.6 1.6 3.3 0.3 -47.0 -44.5 -46.6 -439 -45.2 -48.4 -46.0 Note: Includes natural gas liquids (NGLs), nonconventional and other supply sources. a. Includes processing gains (I .6 mb/d in 1997). b. Includes NGLs (2.8 mb/d in 1997). Snurce: Intemational Energy Agency and Vvorld Bank, 12 COMMODITY MARKETS AND THE DEVEIOPING COUNTRIES ENERGY higher demand in India is offsetting the declines other countries. Output is expected to fall 0.15 in the East Asia crisis countries. mb/d in Russia, and smaller declines are In the fourth quarter world demand is expected in China and Egypt. expected to reach its seasonal peak, assuming Assuming that OPEC continues to produce normal weather (table 9). However, growth will at its current level of near 30.0 mb/d in 1999, be less than 1% compared with a year earlier the stock draw in the first quarter should be because of recession in Asia and a slowdown in normal, as should the build in the second quar- economic activity in most other regions. Non- ter. This would do little to materially change OPECproductionisexpectedtoriseby1.2mb/d the supply overhang in the market. In the fromthethirdquarter,withmuchofthegrowth second half of the year the implied stock in the North Sea, where a rebound from sum- changes tighten the market somewhat, but the mer maintenance and the start-up of new pro- annual draw is still only 0.2 mb/d. As such, duction is expected to lift output by 0.8 mb/d. prices might only rise modestly. Production is also expected to increase in the However, there are both upside and down- US Gulf of Mexico and in Latin America. side risks. On the downside, a worse than Assuming OPEC production of 29.9 mb/d, expected economic outlook could result in a stock draw of 1.7 mb/d would be expected lower demand. Mild seasonal weather would in the fourth quarter. While not untypical, it further reduce demand and add to the prob- is a sizable draw given the extraordinary build lems for oil producers. Fewer technical prob- this year, particularly in the first half. lems in the nion-OPEC supply arena and For 1999 the International Energy Agency overproduction by OPEC producers would (IEA) is projecting an increase in world oil also prevent prices from recovering. demand of 1.5 mb/d, or 2%, with moderate On the upside, OPEC meets in November growth in all regions. ForAsia (including OECD and may decide to cut production further, countries) demand is projected to increase by which would give prices a boost if the cutbacks 0.45 mb/d, or 2.3%. This is down significantly were significant. On the demand side, a less from previous growth oflnear 1.0 mb/d, which severe than expected global slowdown and accounted for half of the growth in world oil faster than expected recovery in Asian demand demand, but it is up from the estimated decline would also give added support to prices. And of 0.2 mb/d for this year. Of the projected extreme weather in the winter and summer increase China accounts for 0.21 mb/d, India would further fortify demand. Given the poor 0.09 mb/d, and the rest of Asia 0.15 mb/d (an performance of non-OPEC supplies during increase of little more than 1%). the past couple of years, 1999 could also be a Non-OPEC supplies are projected to increase disappointing year, especially if prices remain by 1.0 mb/d, up from a rather disappointing low. Political and economic problems in coun- growth of less than 0.4 mb/d thisyear. However, tries such as Nigeria and Russia could also production cutbacks in support of OPEC totaled result in a shortfall in production. some 0.2-0.3 mb/d this year, which otherwise Finally, there is heightened risk of supplies would have resulted in non-OPEC supply growth being curtailed from Iraq because of its refusal of as much as 0.7 mb/il. Well over half the to cooperate with UN weapons inspections. growth is expected in the North Sea from the Failure to resolve this dispute may provoke start-up of new developrnents, some of which military strikes. In addition, the oil-for-food were to be on-stream this year butwere delayed program comes up for renewal at the end of by technical problems. Supply is expected to November. rise 0.26 mb/din LatinAmerica, withincreases Aside from the global economic uncer- mainlyin Braziland Colombia. Smallerincreases tainty, there are a number of upside risks, are expected in the US, Kazakhstan,Azerbaijan, which should allow prices to increase mod- Vietnam, Papua New Guinea, and a number of erately next year. NOVEMBER 1998 13 BEVERAGES COCOA COFFEE _ 00 400 * 3 -(US centslkg) (US cents/kg! 300 Nwcr daily price, 178.r 4 ICO irdctor price, other 200 a ~~~~~NewYork and Londor.MA mi/d orcbicr2 New/YorkfI d M 0 * 174.10 173 88 c 998 and BremenlHamburg 80 85 90 95 °q~~~~~~~~~~~CT D9E9C7 R*!El X XI685 9 392.8 PEB US35 169.64 \ / \_: 3~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~69.6 F9E98 S SI I 3896~~~~~NV'OC =~~~~~~~~~~~~~~ 1997 \/9 7s- 16432 FEB ;998 **1 ii 300 25l 9_250 \ 246.6 200 SEP _ 80 85 90 95 998 MARKET LIBERALIZATION IS WELL UNDER WAY BRAZILIAN BUMPER CROP PULLS DOWN ARABICA PRICES IN C6TE D'IVOIRE The arabica price indicator for July- Cocoa prices averaged 170¢/kg this quar- September averaged 2596/kg, down from ter, down 2.7% from last quarter's 174¢/kg 3046/kg in the second quarter and about ' and almost unchanged from the same quar- 40% lower than last year's thir(d quarter aver- ter in 1997. Both New York and London age. Robusta prices followed a similar pat- futures markets experienced smallbutnotice- tern, with a 10% drop from last quarter, able price declines as well. The fall in cocoa though remaining 3% higher than during prices has been modest compared with the same quarter of last year. The recent declines in other commodity prices, however. plunge in arabica prices reflects Brazil's Preliminary estimates for the 1998/99 bumper crop as well as increased concerns (October-September) season suggest that net about the deterioration of the economy on output may reach 2.77 million tons, up from the part of Brazilian coffee exporters, prompt- 2.64 million tons in 1997/98. C:te d'Ivoire, ing them to convert their coffee stocks into the world's dominant producer, is expected foreign exchange. to produce 1.15 million tons, followed by Global arabica production is expected Ghana with 0.41 million tons. Asian produc- to exceed 78 million bags in 1997/98 tion is also set to increase from 0.44 tons to (October-September), up 11 % over the pre- 0.49 million tons, and Latin American from vious 12 months. Production in Brazil will and 0.38 million tons to 0.46 million tons. reach almost 34 million bags, well above last Ending stocks are expected to decline by season's 25 million bags. Costa Rice's ara- almost 10% (from 1.07 to 0.97 million tons). bica output will also increase by an estimated C6te d'Ivoire's cocoa market liberalization 11% (from 2.24 to 2.09 million bags). iswell underway, and if all proceeds as expected, Although Mexico's crop was initially esti- the sectorwillbe fullyliberalizedbythe 1999/00 mated to be 10% lower than last season, the season. In addition to higher farmgate prices, recent drought has resulted in a downward which should translate into higher farm prof- revision of losses, putting them as high as its, the entire market may go through a trans- one third of the crop. Together with the formation as the state marketing system is recent low prices, the result may be a $100 replaced by a large number of new private million loss in export revenues. Guatemala's traders and exporters. Market analysts are con- coffee crop is expected to take a big 14% hit. vinced that the competitive pricing mechanism Kenya, too, is expected to take a big hit, with will result in further expansion of cocoa. expected losses of 26%. 14 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES BEVERAGES Robusta production is expected to decline TEA 3103 by an estimated 4-5% (from 27 million bags (USAceNtskg) 998 in 1996/97 to 25.8 million bags in 1997/98), Colombo cuc ojns. a result of big losses in Uganda (estimated at / \ 221 5 about 30%) and small but noticeable reduc- MAT 223.9 1998 tions in C6te d'Ivoire. Asian robusta produc- OCT 1 997 tion is almost unchanged, with current estimates at almost 15 million bags. Consumption in the major importing countries is expected to remain the same, 1979 at around 75 million bags. Europe consumed 5JU 300 9. 41 million bags in 1997/98, followed by the 250 SEP US at 18 million bags, Central and Eastern 00998 Europe at 6.1 bags, andJapan at 5.4 million 80 85 90 95 bags, according to recent LMC International estimates. PRICES COME UNDER iNCREASING PRESSURE India's coffee futures exchange began Increased production and weak import trading coffee contracts onJune 19. The cof- demand in Russia sent prices lower. The auc- fee futures contract was launched to pro- tion price (3) averaged 194.5¢/kg during the vide hedging facilities for exporters who quarter, down from 221.4¢/kgfor the same quar- handle 70% of India's coffee production. teroflastyear.Pricesweredowninallthreemajor With an average dailytradingvolume of 2,000 auctions over the same quarter of 1997: 13% in contracts of 600 kg each, the exchange is Calcutta, 5% inColombo, and 19% inMombassa expected to generate a turnaround of $2.4 World tea production increased in response million a day. India is the fourth country to to favorable weather. Abundant rain enabled offer coffee futures trading-the others are Kenya to boost production 59% in the first the US (New York), the UK (London), and seven months of the year over the same period Japan (Tokyo). of 1997, when production suffered from El Following the proposal to allow Brazilian Nifio-related effects. Kenyan production for coffee to be delivered against the "C" contract the year is estimated at 290 million kg, about at the New York Coffee, Sugar, and Cocoa 27% higher than last year. Exchange, Central American producers have India's output is up by 11 % and Sri Lanka's threatened to leave the exchange. Under the is up 1.5% for the first seven months. India, proposal, Brazilian washed arabica would be the world's largest producer, is likely to har- delivered at 40 cents below the basis contract. vest 835 million kg of tea this year, up 3% from Currently, arabica from Colombia is deliver- 1997. Weakened demand from Russia, which able at 20 above basis. Central American cof- accounts for 65% of India's tea exports and fee producers fear that high volumes of 40% of Sri Lanka's, led to a decline in Calcutta Brazilian washed will undermine the "C" con- and Colombo prices. Russia's import demand tract's role as a hedging instrumentfor Central fell with the devaluation of the ruble, which American traders. lost 61 % of its value against the dollar between Following liberalization moves in C6te June and September. d'Ivoire, Tanzania, and Uganda, the Coffee Mombassa prices were supported by firm Board of Kenya is considering liberalization demand from its main buyers, Pakistan, Egypt, as well, through warning that the move will be the UK, and Middle Eastern countries. gradual and controlled. The board expressed However, despite strong demand, increased concerns that full liberalization at this time output led to a decline in Mombassa prices might even work against farmers. from last year's 14-year high. NOVEMBER 1998 15 FOOD FATS AND OILS COCONUT OIL 723.'0 _a (UiS dol(sImt) MAY DESPITE THE EAST ASIAN CRISIS PRICES REMAIN FIRM Phippvesfindorevan, J998 bul of Rotterdam, y* , , .*Despite the East Asian crisis, which has hurt 3 * many commodity prices, most oils have held up relatively well. For example, while the non- energy commodity price index fell almost 18% IuN 652.0 in 1997/98 (October-September), soybean and | 998 SEP 6270~~~~~~~~~~~~~~19 coconut oil prices rose 11-12% and palm oil ocr prices were up a whopping 34%. The three oils \ / account for more than 40% of world oil pro- \,200 duction and almost two-thirds of world trade. 5580 800 World production of the 17 major fats and 600 oils is expected to reach a record 104.68 mil- 80 85 90 95 200 lion tons in 1998/99, up from 101.34 million tons in 1997/98 (table 10). Soybean and sun- PRICES INCREASE SHARPLY * flower oil alone account for half the increase. Prices averaged $662/ton in the third quar- _ Record soybean production is expected in ter, down slightly from last quarter's $664/ton both the US and South America. but up 12% from last year's third quarter. Trade is expected to reach 33.28 million Coconut oil accounts for about 3.5% ofworld tons next season, up from 32.48 million tons production of the 17 major fats and oils. More in 1997/98. The bulk of exports is expected than half is internationally traded (repre- to go to China and India, where domestic oil senting 6% of global fats and oils trade). Palm production was severely damaged by recent kernel oil, a close substitute for coconut oil, floods. Both countries have consistently averaged $694/ton in the third quarter, about increasedtheiroilconsumptioninrecentyears $50/ton lower than last quarter but still because of population and income growth. $100/ton above the 1997 average. Ending stocks will be about 11.10 million tons, World production of coconut oil is expected bringing the stock-to-use ratio to 10.6%, or 39 to be about 2.83 million tons in the 1998/89 TABLE 10. PRODUCTION, EXPORTS, AND STOCKS OF season (October-September), down from last MAJOR FATS AND OILS (MILLION TONS) 1998/99 season's 3.42 million tons; the reduction is due Stock to to the El Nifio weather phenomenon. The use rotio Philippines, the world's dominant coconut oil 08) Exports Production Stocks (percent) producer, is expected to produce 959,000 tons, SPoybean 7.5 .2 2.46 14 down from 1.47 million tons in 1997/98. Rapeseed 12.62 2.24 1.02 8 Indonesia's output is expected to drop to Sunflower 9.81 3.22 0.83 8 629,000 tons, from 727,000 tons. India, the third Tallow and grease 7.66 2.10 0.52 7 Lard 6.58 0.17 0.40 6 largest producer, will see production of about Butter (as fat) 5.85 0.63 0.69 12 420,000 tons, the same as in 199 7/98. Palm ker- Groundnut 4.27 0.25 0.44 10 Cotton 3.92 0.20 0.26 7 nel production, however, is exlpected to reach Coconut 2.83 1.33 0.34 12 2.27 million tons in 1998/99, up from 2.16 mil- Olive 2.42 0.49 0.97 40 Palm kernel 2.27 1.12 0.20 9 lion tons in 1997/98. Corn 2.01 0.72 0.14 7 Coconut oil exports are also set to decline Sesame 0.73 0.02 0.05 17 to 1.33 million tons, down from 1.93 million Linseed 0.71 0.15 0.09 13 tons last season. World ending stocks are set Castor 0.50 0.63 0.04 8 to decline by an estimated 110 000 tons to Total 104.68 33.28 11.10 11 y Source: OilWorld,July 17,1998.(Pricesofoliveoil,butterandsesame 311,000 tons, the lowest level in the past five oil are from The Public Ledger), years. 16 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES FOOD PALM OIL SOYBEAN OIL ( Dutch crude,) (US doilGrsIrnt) 7! fob., ex-m,li. Malaysaon, 5% bulk 7050 SEP c.i.fNWEurope. MAY 1998 676.0 671.0 / 998 NOV MAY / ~~~~~~~~~~~1 997 59290 15985 JUN DEC quaterfl97.PLmolacounsfoabotl8 998 61f 1i997. oba i consfrmr 988~~~~~C 199759 00 ~~~~~~800 AUG 700 1998 600 ~~~~~~~600 547.0 400 0 OCT 00300 1997 s0 BS 90 95 80 8m 90 95 L-AGGED EL Niiho EFFECTS LOWER PRODUCTION CHINESE IMPORTS SURGE TO REPLACE FLOOD- PROSPECTS DAMAGED DOMESTIC PRODUCTION During July-September, palm oil prices av- Third quarter soybean prices averaged eraged $683/ton, just 1. 1% more than the sec- $606/ton, 7.3% lower than in the second quar- ond quarter, but 34.2 %higher than in the third ter, but 11.3% higher than in the samne quar- quarter ofl1997. Palm oil accountsfor about 18% ter of 1997. Soybean oil accounts for more of world production of the 17 major fats and than 20% ofworld production of fats and oils. oils, and 70% ofitis internationallytraded, mak- About one-third of soybean oil is interna- ing it the most highly Iraded oil. Palm oil is a tionally traded, with the US and Brazil account- close substitute for soybean oil, which accounts ing for 85% of exports and the EU accounting for 21 % of global fats and oils production. for 42% of imports. Global palm oil production in 1998/99 Global soybean oil production in 1998/99 (October-September) is projected at 17.65 mil- (October-September) is expected to reach lion tons, some 650,000 tons more than a year 24.11 million tons, up 5.5% from the 22.85 ago. Production in Malaysia, the world's dom- million tons produced in 1997/98. US soy- inant producer, is expected to reach 8.54 mil- bean production is expected to reach a record lion tons (up from 8.48 rnillion tons last season), 75.4 million tons, according to the US while Indonesia, the world's second largest pro- Department of Agriculture. Exceptionally high ducer, is expected to produce about 5.63 mil- yields due to favorable weather in Argentina lion tons, up from 5.27 million tons last year. (production up 20%) and Brazil (up 7%) will Oil World reports that Indonesian palm oil also contribute to this increase. yields may decline even further to 2.85 tons Exports are expected to reach 7.93 million per hectare from 3.19 last year, as the lagged tons in 1998/99, up from 7.37 million tons effects of El Ninlo take their toll. However, the last season. Much of the increase comes from decline in yields will be offset by the continued Argentina (33%), the US (17%), and Brazil sharp increase in mature area, so production (16%). China is expected to import 2.50 mil- for the next two seasons will be simnilar to the lion tons (up from 2.23 million tons last sea- current season's. son), accounting for almost one-third of world Palm oil exports reached a record 12.06 mil- exports. The higher imports are needed to fill lion tonsin 1997/98, upfrom 11.80in 1996/97, the gap from reduced domestic production, mainly due to strong demand from India and a result of the worst floods in at least four Pakistan. Combined, their imports rose to 2.79 decades; increased income, which has boosted from 2.41 million tons last season. purchasing power, has also contributed. NOVEMBER 1 998 17 FOOD GRAINS MAIZE 175 ~50 * - =~]fls 25 HIGHER PRICES LIKELY AS WORLD BALANCE TIGHTENS IO204 so World grain prices have declined sharply 1997 114.2 80 85 90 95 during the past two years, depressed by grow- A998 ing stock levels, stagnant import demand, 1135 and reduced expectations following the finan- 1997 07.!~~~00 cial crisis in Asia. These concerns now appear AP JUL to be exaggerated, however, and expectations 9 could change quickly. The global grain demand-supply balance is tighter than pre- viously expected, due to downward revisions 86.3 in estimated production. This could lead to USdol 2syel) 1998 higher grain prices despite the economic fa.b. Gulfboots. slowdown that has spread through Asia. Price increases appear most likely for rice, COARSE GRAIN STOCKS APPEAR ADEQUATE whose demand-supply balance is very tight. Maize prices fell to $86/ton in September- Wheat and maize prices are also expected to levels not seen since 1993. The sharp decline rise from their current depressed levels. World was due to a large US crop, weak import grain stocks appear adequate to meet likely demand, and the general gloom pervading trade levels and final demand, and this should commodity markets following the Asian finan- moderate price increases. The disparity in the cial crisis. The fundamentals of demand and demand-supply balance between rice and supply do notappear tojustify the current low other grains could lead to wide price differ- prices. Prices rose in October and are expected entials and encourage the substitution ofwheat to rise further as the market begins to focus for rice in food use and maize and other coarse again on fundamentals. grains for wheat in livestock and poultry feed. World coarse grain production benefited The global grain stocks to use ratio is from above-trend yields to build stocks for the expected to fall to 16.3% by the end of the fourth consecutive year, but production fell current crop year (mid-1999) compared to short of the record of two years ago. Maize 17.4% in the previous year and the 17.6% production (which accounts for two-thirds of average for the 1990s. The major exporting total coarse grains production) rose to a record countries hold 44% of world grain stocks, level, paced by large crops in China and the which is greater than in recent years and US. Stocks are expected to rise to 15.6% of should moderate price increases. These use, well above the recent low of 11.6% in stocks are readily available for export and are 1995/96. a good indicator of the potential for price Trade remains stagnant, in partareflection increases. The sharp grain price increases of the Asian financial crisis, so significant price of 1995 occurred when the share of stocks recovery is unlikely. A smaller price increase held by the major grain exporting countries is still expected, however, to correct the sharp had fallen to 25%. The US, the largest grain declines of the past two years. The tight exporter, is expected to hold 74 million tons demand-supply balances in wheat and rice of grain (24% of world stocks) by the end of could also strengthen the maize market. The the current crop year, well above last year's US accounted for about half of world coarse 59 million tons. World grain trade should grain exports in 1997/98, followed by decline slightly from last year's levels but Argentina with 15%. US coarse grain stocks should remain near the decade average of are expected to rise from 38 million tons last 210 million tons. year to 48 million tons in the current crop year. 18 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES FOOD RICE WHEAT 250 500 3255 4040 0 JUN 321(3 15fs6 15s * 4 0 0 ~~~~ ~~~ ~~~~~~998 SEP 0CT 3,i2300 00_98 1997 too 200 80 85 90 95 __loo / +u'~~10 138.9 80 85 90 9s M0AR ,37I X X Market-yeorending stocks 296.0 JAN as percentoge o consumption MAR 1998 29,5 ( 998 \986187 1 7. 265.8 / 982/8 (997JUi79 v ~~~~~~~~~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~1998 \ SEP || 19429 i992/93 (US dol((rslmt) 15.6 2525 Thai, 5% broken, white, (US dollar,,t) ,7 997198 NOV indcotwe market sur'ey US, no. I Hord Red Wmnter 1980/86 (99/9 (997 prce, fob. Bangkok Gulfpon prompt shipme,c 171 1980181 CONCERNS RISE AS STOCKS FALL TO 25-YEAR LOW PRICES EXPECTED TO REBOUND World rice stocks are projected to fall to a Prices have fallen 60% from their 1995 level 25-year low in the 1998/99 crop year on a stocks and are approaching anew low, although some E-y to use basis, according to recent USDA esti- rebound is expected over the next few months. as pecentage ofconsump0on mates. The traditionally thin world rice mar- Market sentiment still seems dominated by ket, with low carryover stocks and small shares the slowdown in Asia. Estimates of demand (98018! (6.9 of production traded, could see sharply higher and supply in the wheat market indicate that (\9 90 prices this year. Prices for high-quality long- total use will exceed production and lead to | grain rice remained steady at $320/ton dur- a reduction in world stocks. Prices are not ing the summer, while the lower-quality grades expected to remain at current levels but should 1498788 1 saw sharp increases, a likely harbinger offuture increase to reflect these revised estimates of 1994/95 increases. Prices fell in October, but the declines production and the relatively tight stock I are expected to be transitory. situation. i997/98 Major producers China and India (which Stocks are down from 23.0% of use at the accountfor56% ofworldproduction) havelower end of the 1997/98 crop year (July 1998) to _ production than last year and are expected to an estimated 20.6% at the end of the 1998/99 Morkpe-yeortendog stocks ais percentage ofconsurmptioa draw down domestic stocks. The two countries crop year. While the estimate will likely 34.8 accountedfor25% ofworld exportsin calendar change during the year, most major pro- 1985186 year 1998 but are expected to contribute just ducers now have a good notion of the size 15% to world exports in 1999. If either China of the current crop. The most recent low in 26.3 or India were to halt rice exports because of a the stocks to use ratio was 19.2% in 1995/96, 1992193 domestic shortfall, prices could rise sharply. which led to sharp price increases. If next 25.6 Production of the largest rice exporters, year's harvest is below trend, that will likely 1980/81 Thailand andVietnam (withacombined40% lead to higher prices and even lower world 1989/90 206 of exports in 1998), is reported to be about stocks. 187(997/98 the same as last year. However, both coun- World trade is expected to remain stagnant, NoteDaa for1994/95 ann 99/96 are tries are expected to have lower exports than with exports falling to around 98-100 mil- e2at-t d. lastyear, and this leaves little margin for error. lion tons. The Asian financial crisis is not Reports of drought damage in Thailand add expected to cause a reduction in exports. to the concern. Other rice exporters, such as Exports from Argentina and Canada are likely Australia and the US, are also expected to have to decline due to lower production, but lower exports in 1999 because of reduced 1998 exports from the EU and US should increase production. following record crops. NOVEMBER 1 998 19 FOOD BANANAS SHRIMP 15.92 MAY 600 (US dollars/mt) (US doiars1kg 1998 __Centa and South American US, Gulfbrown headless, 5.32 ^_5 500 importer's price, free-on-rail 26-30 count per pound, JAN (fob), US ports. 6 oso NewiYok 998 400 600.2 300 JUN 526 30 85 90 95 1998 OCT 1997 I 14.30L 447.5 / MAY \ 1998 FEB 1998 4 i 8.9 998 SEP 400.1 395.22 OCT MA R 13.12 997 998 SEP 80 85 90 95 9 1998 DISPUTE OVER EU BANANA QUOTA CONTINUES PRICES WEAKEN ON ASIAN FINANCIAL CRISIS Banana prices (f.o.b. US ports) averaged Despite continued strong demand in the US $419/ton injuly-September, down 20% from and recovering demand in Japan, prices fell last quarter, but almost 8% higher than in because ofincreased production in Ecuador and July-September 1997. Weakworldwide demand the US. Prices for gulf brown 26/30 count aver- is largely to blame. Banana exports have fallen aged 1373.3¢/kg, 12% lower than last quarter. accordingly. For example, banana exports from The recovery in shrimp demand in Japan Ecuador, the world's largest exporter, were reflected the seasonal upsurge for holiday fes- down an estimated 18.5% over lastyear, accord- tivals in August. Appreciation of the yen against ing to Sopisco News. the US dollar in September also lowered shrimp Although the EU agricultural ministers prices and improved demand, particularly for agreed to raise banana import quotas from 16/20 count black tiger. Exports to Japan Latin America by 353,000 tons following the increased during the quarter, although for the World Trade Organization's (WTO) ruling, first seven months of the year they were 13.7% the dispute is far from over. The US, along below their 1997 level. Exports to Japan from with Ecuador, Guatemala, Honduras, Mexico, major exporting countries dropped significantly and Panama, charges that the EU's move falls over this period-1 1.6% for Indonesia, 16% for far short of compliance with the WTO rul- India, 21.5% for Vietnam, 36.5% for Thailand, ing. The US has threatened to take retaliatory and 14% for China. measures if the EU does not revise its quota Demand remained strong in the US dur- regime. US interests are backed by the three ing the quarter, but prices weakened with the dominant trading fruit companies, Chiquita, start of the shrimp season in August in Dole, and Del Monte, which control about Louisiana and Texas. Exports from Ecuador two-thirds of world banana trade. and Mexico increased, and exports from other Not surprisingly, the African, Caribbean, countries remained high. Exports to the US and Pacific Rim countries, mainly former for the first half of the year were 21% higher colonies of EU states, support the EU's deci- than during the same period last year. sion regarding preferential treatement of their Although US demand is expected to increase bananas, and they recently lobbied US poli- toward the year-end holiday season, increased cymakers to change the US position on this supplies from Ecuador may weaken prices. issue. Even within the EU, however, there is With the exception of fresh water shrimp, no unanimity regarding the revised quota demand in European countries was low dur- regime. ing the quarter. 20 COMMODITY MARKETS AND THE DEVELOF'ING COUNTRIES AGRICULTURAL RAW MATERIALS SUGAR COTTON Timber prices (US centslkg) (US centslkg) increase due to 27.2 World' ISA daily p0ce, 000, Cotton Outlook A index, D7EC ffob., stowed Caribbean potts. 7.T c..f Lverpool ond Europe currency 1997 changes. \ X 54 0 . ~~~~~~~~1 990 I 00 25. 154 0 OCT jUL 97.2 1997 1998 1997 '24 2i. 151. 198 11998 1464 80 1~~~79 25141.9 i998 88 0 JUN 225 MAY 60 1998 159 - 175 98 ~~~0~ 40 SEP 175v 9. 20 999 ~~~~~~~~ ~~~25 199 87.7 85 90 95 0 80 85 90 95 998 PRICES FALL TO 10-YEAR LOW PRICES CONTINUE TO FALL ON WEAK DEMAND 84.9 World prices fell during September to a 10- Following a mild recovery in July, the /998 year low-below 7¢/per pound on the NewYork medium staple cotton price indicator (Cotlook futures market-before rallying in October. A Index) continued its slide during last quar- Experts caution that prices could go lower still, ter, reaching a low of 146.46/kg, close to the and hopes for a price riecovery are slim. World five year record low reached in May. Although production will likely exceed consumption for the third quarter's average is 2.7% above the the fourth consecutive year, leading to stock- second quarter's, it is 15.6% lower than a year building that will have ending-year stocks some ago. The New York futures contract, however, 2.0 million tons higher. The history of the sugar moved on a stronger tone, reflecting mainly low market suggests that the price decline will not production prospects in the US. correct soon because producers are slow to The International Cotton Advisory Com- respond and market demand is very inelastic. mittee (ICAC) estimates that production in Current stocks will likely hang around for sev- 1998/99 will be 18.65 million tons, down from eral years, and prices could go lower. 19.97 million tons last season, while consump- Sugar for prompt delivery is plentiful, and tion is expected to be around 19 million tons. more supplies are heading for the market as Despite the downturn in production, cotton Australia, Brazil, and South Africa all begin to will be ample this season given China's move market this year's crop. Traditionally large to substantially reduce its stocks. In 1998/99 importers are unlikely to bail out the sugar mar- China is expected to be a net exporter of 300,000 ket because they are all sitting on adequate-to- tons-in 1996/97 it imported 800,000 tons. large crops of their own. China and India, two While production is estimated at 4.10 in ofthelargestimportershavehadgoodcropsand China and 2.89 million tons in the US, down arelikelytoexportsugai. TheRussianFederation, from last season's 4.60 and 4.09 million tons, normally a significant importer, has economic production in the Southern hemisphere is problems thatwill reduce imports from lastyear's expected to rise 10%, continuing the upward level and lower consumption. Major East Asian trend for the fifth consecutive season. Australia's importers such asJapan, the Republic of Korea, production is at a record high, and produc- and Malaysia, are expected to cutback on imports tion in Brazil, Paraguay, and Peru is also set to because of the poor economic conditions in increase. EastAfrican production should remain the region. Even the US, a major importer, will steady despite El Ninlo. need less sugar this year following an increase On the consumption side, East Asia is in domestic beet production. expected to take the biggest hit, with an esti- NOVEMBER 1 998 21 AGRICULTURAL RAW MATERIALS mated decline of 200,000 tons this season, RUBBER dropping the total to 1.9 million tons. In 1988/89 consumption in East Asia reached a 873 82.2 OCT ~~~~FEB record high of 2.56 million tons. 1998 The short-term price prospects do not appear very promising, a reflection mainly of the slowdown in the world economy. World 74.5 68.3 MAR u GDP, which grew at 3.2% in 1996/97 is 1 M98 7SE expected to slow to an estimated 1.7%. The 67.6 1998 JAN Cotlook A Index should average 151¢t/kg in 1998 1998, and a mild recovery is expected in 1999, 200 assuming that the OECD countries do not n50 move into recession. (US cents/kg) 00 M6ofys,dn, RONi Prompt 50 At ICAC's 57th plenary meeting in Santa delivery, fosb. Klon Lumpur. 80 85 90 95 Cruz, Bolivia, on October 12-16, many coun- tries expressed concerns about the world cot- MALAYSIA AND THAILAND WITHDRAWA FROM INRO ton market. Analysts reported that cotton might The July-September Kuala Lumpur rub- be losing market share to chemical fibers. The ber price average continued to fall, reaching primary reasons cited were the absence of pro- a new low of 68¢/kg, down 10% from the pre- motional efforts, especially in developing coun- vious quarter. New York and Singapore prices tries, and the exceptionally low prices of followed suit. All three prices are about 15% chemicalfibers.Asecond concernwas the stag- lower than a year ago. nation in cotton yields since the early 1990s, According to the Rubber Statistical Bulletin, with no sign of recovery in the near term. production of natural rubber was 6.41 million In an unexpected move, Turkey imposed tons in 1997, 70,000 tons lower than in 1996. a 25 ¢/kg tax in August on both imported and Thailand accounted for 2.03 million tons, exported cotton. Following protests by the Indonesia for 1.58 million tons, and Malaysia domestic textile industry, however, the tax was for 0.71 million tons. Production of synthetic replaced a month later by a 5.2% tax applic- rubber reached 10.06 million tons in 1997, up able only to imported cotton for domestic end from 9.79 million tons in 1996. Consumption use (cotton for use in exported products was of natural rubber was up in North America and exempted). Turkey is expected to import the EU, the world's dominant natural rubber 400,000 tons of cotton in 1997/98. Observers consuming regions; it rose from 3.78 million at the ICAC plenary meeting believe that tons in 1996 to 4.02 million tons in 1997 in North Turkey's imposition and subsequent removal America and 2.90 million tons to 3.03 million of the tax will severely impede the liquidity of tons in the EU. the soon-to-be-launched futures contract of The International Natural Rubber Organ- the Izmir Cotton Exchange. ization (INRO)-the world's last commodity Following intensive discussions in Brussels body with a price intervention mandate- at the end of September, the EU decided not appears on the verge of collapse, following to confirm the antidumping duties on Malaysia's and Thailand's decision to withdraw unbleached cotton cloth imposed against the their contributions and effectively end their five major Asian suppliers beyond the soon-to- membership. The two countries account for expire six-month provisional period. Absent this over half of the world's naturaLl rubber pro- decision, the antidumping duties would have duction. INRO, which represents the interests been converted to permanent measures. The of 18 importing and exporting countries, man- concerned countries were China, Egypt, India, ages the third United Nations-backed Inter- Indonesia, Pakistan, and Turkey. national Rubber Agreement. 22 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES FERTILIZERS TIMBER FERTILIZERS Fertilizer prices LOGS (US doharsls/m3 DEMAND WEAKENS, BUT MOST PRICES REMAIN FIRM are mixed, with 2274 Moioysion, meranti, sales Prices for most fertilizers remained steady urea lower OT997 despite seasonallyweak andgenerallylowgrain while other fer- 202.5 prices. Only urea prices fell significantly in tilizer prices i 998 recent months as lower grain prices took their remain steady. toll. But phosphate and potash prices con- 1990 100 1998 tinue firm to unchanged, at least in part 150.2 because of production cutbacks by major pro- \1t998 ducers to keep prices from falling. Signs of 123.0 -w400 building inventories and softening prices are Q 300 beginning to appear, however, for phosphate 200 and potash fertilizers. 80 85 90 95 io° Fertilizer demand depends primarily on the -998 world grain situation, which does not look good 1998 Qi BEARISH FUNDAMENTALS PERSIST for fertilizer producers. World grain prices have : Malaysianexportpricesofmerantilogsfell fallen more than 50% since their May 1996 to $135/m3 in July, their lowest level in 13 high of $241.6/ton (trade weighted). The .1/ years. By September the price was back to September low of $113.5 matched the June 1997 $150/m3, due mostly to the revaluation of the 1993 lowfor the decade. Some upturn in grain 14 ringgit. Many seasonal log producers in prices occurred in October, and prospects are Malaysia have abandoned operations in the for further increases. However, prices may still face of low prices and escalating expenses. remain well off their highs and demand for Similarly, the low prices and heavy rain have fertilizers weak. reduced logging in Indonesia. The process- Total grain areaworldwide was down an esti- ing industry was only operating at 30-40% of mated 27 million hectares in 1998/99 off the capacity in September. As a result, the avail- recent 1996 high and was equal to the 1993 able logs were being shifted to the export mar- level. Comparisons with the first 10 months of kets. By mid-September some 40 Indonesian 1993 are telling. Grain prices averaged timber companies had applied for licenses to $126.4/ton in the first 10 months of 1993 and export 1.6 million m3 of logs. Most importers $128.8/ton this year. Urea prices averaged regard Indonesia's move to export logs as a $105/ton in 1993 and $124/ton in 1998. TSP temporary measure. prices $110.8/ton in 1993 and $174.2 in 1998, Plywood prices in Japan rose marginally and potassium chloride prices $107.9/ton in in September. Although inventories have 1993 and $116.6/ton this year. Both urea and shrunk for domestic and import production, potassium chloride prices have fallen to roughly demand has remained soft. In July 81 timber their 1993 levels, whereas TSP stands out. companies filed for bankruptcy, the second Whether the industry has changed or today's highest number since December of last year. prices are too high for the current market The near-term outlook for the construction remains to be seen. sector is not encouraging, offering little expec- TABLE I1. FERTILIZER APPLICATION SHARES, tation of strengthening demand. 1995 Some African hardwood export trade has Percent been seriously affect-ed by the Asian crisis. Country Nitrogen Phosphates Potosh Gabon exports 96% of its logs (primarily of China 66.4 24.8 8.7 the okoume species). In 1997, 60% of those India 70.8 20.9 8.3 p Indonesia 73.4 14.8 1 1.8 exports went to Asia. That amount has been World 60.2 23.7 16.1 halved so far this year. Source: Food and Agriculture Organization. NOVEMBER 1 998 23 FERTILIZERS POTASSIUM CHLORIDE PHOSPHATES TSP 177.5 15.92 U 1980 12.07 (US dollm/aroL) 1992 Tnple superphosphate, 116850 s pat bulk fo.b OS Gulf 5 1998 SEP 1998 t s ~~~~~~98.13 1983 69.04 2 1987 200 164.3 1 U 1 50 YEARLY (US do,lars!mt) CT7 Munote of potash, standord 1997 grde, spot fob. Voocouwer 80 85 90 95 PRICES CHANGE LITTLE PRICES WEAKEN SLIGHTLY Contract negotiations for the second half Several factors have dampened demand for of the year left prices unchanged at about phosphate fertilizers, from the normal seasonal $117/ton f.o.b. Vancouver. Despite this price slowdown to low grain prices and recession in stability, demand has weakened and supplies Asia. DAP prices averaged $207/ton in October are building. Potash Corporation of for US bulk exports, f.o.b. the Gulf, but sales Saskatchewan has announced plant closings were being reported at$2-5/ton less. Some price to keep inventories from building. Hopes for cutting seems likely as demand remains weak higher prices seem to rest with the major in Europe and the US, and producers are reluc- importers-Brazil, China, and India. tant to cut production. High inventories are also Chinese buyers are still negotiating with reported by many producers. Some produc- Canpotex, the Canadian potash export asso- tion cutbacks are occurring, and a major US pro- ciation, on second half pricing of muriate of ducer announced plant closings in October. potash. Demand is expected to be boosted Triodium phosphate prices declined through- by the massive flooding this past spring and out the quarter, and by October US bulk f.o.b. summer, which could lead to higher demand export prices averaged $171.6/ton. for fertilizer on areas that remain in pro- Hopes for a recovery in phosphate fertilizer duction. demand rest largely with China, which typically Economic problems in Brazil have prompt- accounts for 20-25% ofworld imports. Flooding ed new import restrictions, and this is this year has affected about 21 million hectares expected to dampen demand for fertilizers. of cropland, according to Chinese officials, and Additional restrictions on credit terms are also as much as 13 million hectares may not return expected. Weakened prices for major crops to production thisyear. This has created concern have further reduced demand for fertilizers. about the production potential of the remain- Indian government officials have backed ing cropland and government officials have away from their earlier plans to deregulate called for higher fertilizer inputs on the crop- potash and phosphate prices. Prices will lands that can be planted. Much of the demand remain regulated, and domestic producers will be for nitrogen fertilizers, but the govern- will be forced to sell at fixed prices despite the ment's focus on balanced fertilizer use will likely devaluation of the rupee. lead to higher demands for phosphate fertiliz- The European Fertilizer Manufacturers ers as well. The grain situation in China appears Association forecasts EU fertilizer demand to adequate for the balance of the crop year, but decline 7-9% over the next decade. stocks are expected to decline by about 10%. 24 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES METALS AND MINERALS UREA 1357 Bagd,ot rs b ALUMINUM . Metals and min- APR W Europe. eralspricescon- /998 (US doeGrslmt)) LME, primary rntosliesa high grade, cash w to slide as OC1,607T inventories '997 build. 128.1 19 OCT i27.2 4 JAN0- 1997 FEB 184.1 1998 \1\ i,342.3 1997 SEP - Q4 /20.7 ~~~~~~~~~~~~~~~~~~~~~~998 JUN 250 1998 i9.5EP 3,000 1,307.2 205 0 1998 2°500 JUN 200 1998 2,000 ~~~~~~~~~~~~~~~~~1998 iSO .,500 /,000 78.7 loo ~~~~~~~~~~~~500 /99 77.4 80 85 90 95 /00 80 85 90 95 5 998 PRICES STILL FALLING PRICES DECLINE ON GROWING SURPLUS Urea prices continued to freefall, reaching Average aluminum prices fell 3% in the 74.5 a nine-year low in October. Prices have dropped third quarter on sagging demand and a grow- 7998 more than 50% during the past two years. By ing surplus. Prices dropped to $1,260/mt in Octobertheureapricehadfallento$110.2/ton July, but shrinking stocks and nervousness f.o.b. Western Europe from its high of about supplies out of Russia led to a brief $233.5/ton at the end of 1996. Granular urea rally in September, with prices peaking near for prompt delivery was on offer at $92/short $1,400/mt. The rallywas short-lived, however, ton ($101/metric ton) in the US Gulf. Black as rising stocks, concerns about a broader eco- Sea prices for bulk shipments were $70/ton, nomic slowdown, and heavy producer selling f.o.b., and prices are still falling. The Ukrainian caused prices to recede, ending the month at official minimum indicative price for November $1,315/mt. has been set at $70-73/ton f.o.b. Ukrainian Stocks with the London Metal Exchange production continues at full capacity despite (LME) fell 15%, or 80,000 mt, duringJuly and the building level of stocks. A substantial sur- August, mainly in the UK Part of the draw- plus of product now exits, and demand is down was due to strong demand, but some unlikely to increase enough to absorb pro- consumersreportedthatitwascheapertobuy duction or to reduce the surplus. Russian pro- and ship Russian-origin material from LME ducers are also operating at near capacity, stocks in the UK than to purchase and ship adding further to the surplus in the region. the same material from St. Petersburg. Stocks Inventories are also increasing in the US. climbed in September, recovering much of Domestic production rose 11% during the the drawdown of the two previous months. third quarter over the same period of 1997, IPAI stocks of unwrought aluminum rose a and September inventories are reported to be hefty 68,000 mt in August, with Europe 28% higher than in 1997. In Canada urea pro- accounting for the bulk of the gain. Stocks are duction was 19% higher for July-September estimated to have risen further in September. than in 1997, and September inventorieswere Demand continues to post moderately up 75% from 1997. strong gains of 2.0-2.5% in Europe and Demand may get a boost from Chinese North America, but this has been offset by imports,whichareneededtooffsetlossesresult- large declines in Asia. European demand ing from the recent flooding. Floods damaged continues to be buoyed by the transporta- croplands, and higher fertilizer applications tion sector, with strong auto sales in France, are required to return the land to production. Germany, and Spain, as well as the UK and NOVEMBER 1998 25 METALS AND MINERALS Italy, although Italian sales have fallen off COPPER 3000 since the incentive scheme ended inJuly. In 2,052.3 /2500 North America demand remains strong in 199T i 500 the auto sector. Production, which slumped 0 805 90 95 i 00 a bit during the General Motors (GM) strike, has since recovered. The construction sector also remains strong on both sides of the \ Atlantic. APR \ 8 ~~~~998 In Asia aluminum consumption continues to record large declines because of the severe \ /7\ recession in a number of countries. Demand SEP in Japan is still feeling the effects of falling 1,664.8 1,660. production and sales in the auto sector and a (US eofolrs/mt) 998 1998 LIVE, cathode ond M,e protracted slump in the construction sector. shopes, set6ement price Aluminum demand is expected to shrink some 10% this year. In the Republic of Korea PRICES FALL ON RISING STOCKS demand fell hard in the first half of the year Copper prices fell 5% in the third quarter but the large declines appear to have moder- on rising stocks and weak demand in Asia. ated in the third quarter. Korean mills signif- Demand remains strong in the US and Europe, icantly raised their exports and are looking but surplus production and higher exports for markets outside of Asia, where demand from Asia led to soaring inventories and remains weak. pushed prices lower. Concerns are mounting that a widespread LME stocks rose 66% in the quarter to economic slowdownwillpush the marketinto 414,075 mt, with September's increase of greater surplus and depress prices. After 107,000 mt the largest monthly gain in more recording only marginal growth this year, than a year. Stocks in Singapore rose as the global demand is projected to grow some 2% continued demand slump in Asia induced next year, despite an expected slowdown in shipments fromJapan, the Republic of Korea, North America. This projection assumes some and the Philippines. Chinese stocks have also recovery in consumption in many of the risen significantly because of a slowdown in affected Asian countries. demand. Production has outpaced demand this year, In the early summer months little copper reflecting the commissioning of new smelting was arriving in European warehouses. Rather, capacity, the reactivation of idle capacity, and inventories were building steadily in the US, various plant upgrades and refurbishments. resulting in a complete dislocation in the A surplus of some 400,000 tons is expected, normal regional pattern of stock holding. despite production curtailments in several The LME announced in early September that countries, including Ghana, India, Indonesia, it was imposing capacity constraints on the and Venezuela. Production is set to rise more quantity of copper stored in its warehouses than 3% in 1999, with major new expansions in Los Angeles and Long Beach, California, and upgrades. This could result in a large to prevent a concentration of copper in these surplus next year if demand turns out to be west coast facilities. Stocks held in these two weaker than expected. If so, that suggests that locations as of noon on December 2 1998, significant cutbacks may be necessary to pre- were declared to be the maximum level per- vent prices from falling further. It is not known mitted for storage on warrant firom that date where the cutbacks may occur, but they are- forward. unlikely to be among the new expansions with The west coast warehouses are in an area low production costs. of net copper production, not consumption. 26 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES METALS AND MINERALS Earlier movements of metal out of these loca- GOLD 600 tions to Southeast Asia seemed to justify the 500 appropriateness of these delivery points, even 400 though the LME's mandate is to authorize 3 083.0 85 90 95 300 warehouses in areas of net consumption, not APR\ production. The collapse in Asian demand \99 halted these flows, however, leading to grow- ing complaints that physical premiums in 2889 Europe were being kept high because metal 292.3 SEP7 was piling up in warehouses on the west coast DEC 1998 of the US. 1997 World demand is up more than 1% this year, with strong growth in Europe and North (US dol!orsl/uoy ounce) America partly offset by large recession- UK99.5%fine. induced declines in Asia. US consumption has risen nearly 6%, fuieled by strong demand PRICES REMAIN DEPRESSED AND RANGEBOUND in the housing sector. Consumption growth Gold prices averaged $289 a troy oz (toz) stumbled briefly during the GM strike but during the third quarter, down nearly4% from has picked up since. In Europe copper con- $300 in the second quarter. Prices traded sumption is up more than 6%, mainly on within the narrow range of $285 to $295 for strong auto sector demand in a number of most of the quarter, but dipped briefly to a countries. Latin American demand also 19-year low of less than $271 at the end of remains strong, led by good growth in August. Concerns over the global economy- Mexico. and over Russia in particular-along with Asian demand remains extremely weak in heavy selling from funds and producers, drove construction and automobiles, the main cop- the price down sharply. It quickly rebounded, per consuming industries. The Republic of however, in part because of short covering. Korea led double-digit declines in many of With world stock markets volatile and the crisis countries this year with a drop of rapidly losing value and nervousness about 20%. Demand fell 10% inJapan, with all sec- state of the world economy intensifying, tors registering declines. investors fled to the safety of cash and bonds There are growing concerns that an eco- rather than gold. However, weak fundamen- nomic slowdown in the US and Europe and tals in the gold market are also contributing sagging demand in developing economies will to the strategy of avoiding gold in troubled continue to exert downward pressure on cop- times. per prices well into next year. While US and Demand in the main countries monitored European demand will most likely weaken, by the World Gold Council fell 28% in the first the large declines in Asia are not expected to half of the year, pulled down mainly by the continue. 55% Asian-led drop in the first quarter. In the face of weak demand and expected Demand rebounded by 50% in the second new production start-ups next year, some pro- quarter but was still 9 % lower than a year ear- duction cuts will be necessary to prop up lier. Demand remains weak in Asia due to prices. To date low prices have induced little recession and the high domestic prices result- cutback in output. Hlowever, if the tight sup- ing from currency devaluations. Distress sell- ply of concentrates deepensaethe one bullish ing by consumers has continued, especially in factor in the marketasmelters may have to Indonesia, the Republic of Korea, and scale back production because of a shortage Thailand, although at dramatically lower lev- of feed. els than earlier in the year. Partly offsetting NOVEMBER 1998 27 METALS AND MINERALS these declines in consumption, was continu- IRON ORE AND STEEL ing strong growth in demand in India-the 33.25 YEARLY Iron ore world's largest consumer-which rose more 32.50 1991 ilicents/dntFec than 15%. 1982 prAce to Germony. On the supply side, gold production was up 3% in the first half of the year. Currency depreciation in a number of producing coun- 28 88 tries enhanced profitability and induced 89/ higher output. Despite low prices and announcements of closures and cancellations of projects over the past vear, producers have 25.47 managed to reduce costs markedly. While the ( 994 decline, in US dollar terms, has been due 23.50 partly to producing countries' currency depre- 1988 ciation, producers have reduced actual costs by improving efficiency, closing marginal oper- STEEL PRICES DECLINE ON SLOWING DEMAND AND ations, focusing on higher-quality assets, and SURPLUS PRODUCTION improving management, including corporate The index of steel prices continued to restructuring. decline during the third quarter, falling 7% There were further sales by a number of amid weakening demand, rising stocks, and central banks in the third quarter, those in surplus production. Demand has been strong Canada, the Czech Republic, and Luxem- in North America and Europe this year, but bourg among them. This follows on net sales weak demand in Asia, the Commonwealth of of 88 tons by central banks in the first half of Independent States (CIS), Eastern Europe, the year. There was also a 160% increase in and more recently Latin America has sent a scrap during the first half, from distress sales flood of low-priced steel to US and EU mar- in East Asia. kets. The surge has prompted unfair trade A number of central banks have entered complaints by domestic producers against a the gold lending business, including those in number of exporting countries. Venezuela, Russia, and a few countries in On September 30 a dozen US integrated Europe. This active management of gold and mini-mill steel companies and the United reserves has increased liquidity in the gold Steelworkers Union filed trade cases against market and has driven down gold lease rates hot rolled sheet and coiled plate imports from to record lows of 0.33% for the one-month Russia, Brazil, andJapan. The mills claim hot rate. However, in late September the rate rolled coil dumping margins ranging from jumped to well over 1% in the wake of prob- 107% to 199% for Russian mills, 30% to 86% lems at Long Term Capital Management, as for Brazilian mills, and 27% to 66% forJapanese central banks became more cautious about mills. Brazilian mills were additionally charged the quality of their immediate counterparties. with receiving illegal government subsidies, Prices are apt to remain rangebound. Any and US mills are seeking countervailing duties rise above $300 is likely to be met with heavy ranging from 31% to 33%. producer selling to maintain profitability. In Complaints have also been filed in Canada, addition, there is the possibility of further sales while Mexico, the EU, and other countries are by central banks to improve the financial preparing complaints against many produc- return on their assets. Any significant drop ing countries in addition to the three men- below $300 may impinge on the volume of tioned in the latest US filing. supplies, butwith ongoing cost reductions the Steel imports for the first eight months were perceived floor continues to fall. up 24% in the US, with shipments fromJapan 28 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES METALS AND MINERALS up 141%, Korea 96%, and Russia 29%. The sheet products is down 15%, and Chinese higher imports, combined with slowing demand is slowing noticeably. demand and domestic capacity expansions, The fear is that a broader economic slump have led to the oversulpply of US markets. will further depress steel prices. Because of The same pattern has affected European weakening demand and the proliferation of markets, where slowing demand, rising pro- trade complaints, producers are likely to cut duction, and high stocks have resulted in an back on production.Japanese producers have oversupplied market and lower prices. EU pro- already cut output, and further reductions in ducers fear that if US antidumping cases are Japan and elsewhere are probable. This should successful, even more steel exports will be help alleviate the pressure on prices. However, diverted to Europe. The devaluation of the many countries being targeted in trade com- Russian ruble has exacerbated the market imbal- plaints to reduce exports, especially those in ance, and EU export opportunities in Asia and Asia and the CIS, are already in crisis or on Latin America are limited, as evidenced by the the verge of crisis and can ill afford to lose supplies being channeled into Europe. export business. Rather than curb output there In Asia, Korean dornestic demand for long will be financial pressures in these countries and sheet products has fallen by more than a to redirect exports, which would add to the third this year, as both private and public pro- downward pressure on prices. jects are being scaled back and the trans- On the positive side, low prices and limited portation sector remains in a slump. Large markets will cancel or delay some capacity declines have also occurred in the other cri- expansion plans and will accelerate the ratio- sis-affected Asian countries, which are feel- nalization of uncompetitive production capac- ing the effects of recession and currency ity. But it will be some time before the market devaluations. Japanese demand for long and feels any meaningful impact from these shifts. NOVEMBER 1998 29 COMMODITY PRICE OUTLOOK ENERGY -* 80 70 pencen 575 70 percent 60t pent r_bsnb it r n ~ 45 'a CflSW pro0bobili. 605pd,b90 _=.5 0 Price in 3.25 dnmb, or 990 dollars p0 . 970 10 200 20- 970 900 990 ,000 20.0 dollors me | dolr prblio t 3.5 _ ____ ____ 27 *40 i3990 =_ 2 73ostn 2.842 3 2.5- 30~ |Price in _rrent B 20 ______________________________________________ dolla~~~~rs p r billion 1995 1996 1997 1998 1999 2000 /995 1996 /997 /998 1999 2000 30~~~~~~ COMDT MAKT AN0H EEOI' ONRE 5,75 . 70 percent 40 70 percent Price in COnstant pr~~~~~~abnb,'y 30I probabilit 3125 1 990 dlollars n /nonen 20 arto 2.0 0 /9 olr 1970 1980 1990 -1 2000 200 .970 i900 1990 2000 2010 3.022 2.531 Price in c rrent AL ~~~~~~~~~Price in cyrrent _ dSO6I dollarsprmillion ojiU ~~~~~~~~dollars pr rbarrel (.0 I10 F /995 /996 1997 /998 /999 2000 /~~~~~~~~~995 1996 1997 /998 i 999 2000 BEVERAGES ** 600 . ~~~~~~~~~~ ~ ~~~70 perent a.~ 70 pe-cnt 4 00 robnb,'o,y 6 251 rlrbt 2 990 2ll7r 1970 1 980 1990 -T 2000 2010 1970 i980 1 990 2000 20!0 2.5 Price in o irrent 4.5~~~~~~~~ric in .ren dollars pc r kilogram~~~/ s dllrsp klora /995 296 /9 98 99 20 95 /9 97 /9 99 20 30 COMMODITY MARKETS AND THE DEVELOPIN'G COUNTRIES COMMODITY PRICE OUTLOOK TEA Y . COCONUT OIL Prices remain firm FOOD (COLOMBO)- - ICOLOMBO) 70 FATS AND OILS 3 50 1 '.7 perrct Fn czns en uo I *-, e-s- 2.5 ° /l 1=2 stbub 20 .1a 1970 1980 19'90 2000 201G0 19 8 19 I90 2000 2O0 Price in irrent I I ; I _ =9101 - pexent ;i_ __ _____,__. 2.0i CellS p-~~~~ --546- / - -0 - 600>- ~2S- s2 s-5; _ _j _NL 600\l peFit5 ffF -425(--_ L - r soof _ _0__ 52 55 Price in current ' -32 dollars per metric ton 325 ---^ o-- - -- - -- - __._ . . _ 40 F995 1996 1997 1 998 1999 2000 995 1996 1997 1 998 1999 2000 RICE GRAINS 275 g> 1 70 prcent P7k050J P o ins contnt 70pecent | 2251 ~~~~~~~~~~~~~~~prnbcb.Icy 180 dnll-r p. prnhvlc, 8 s!Pe,ceincnnntnnt r .,wbvo,r 750 / drtrcrbct, 1970 d 98 990 is 2010 1 970 1900 1990 20 r 166 ~ ~I -- LL 70 9 ,per8 s \ ~~~~~~~~~~~distribiA ! > '.r,. 4 ~~~~--~~~)><-~~~ f - ~~~~~g~~- 325? _--~ ,25 ?~~~~~~~~~27 __ _ 1 _ _ Price in current Price in cHrrent 15 i dollars per metric ton dollars per metric t4n __ 1995 1 996 1 997 1998 1 999 2000 1 995 1 996 1997 1998 1 999 2000 NOVEMBER 1998 31 COMMODITY PRICE OUTLOOK OTHER FOOD 450 ~~~~~~~~~~~~~~70 pn,cerm 70 ,- 250 9ds 150Preincett 1970 1980 1990 2000 2010 970 1980 1905 2000 2020 I10 - - - - - -_ - 600 Price "I -Curent dollars permti 186 ~ ~ ~ ~ _ __500 eeboe 177~~~~~~~~~~~~~4 i 14 ~~~~~~00 i--- I Price i c:renr dolr prmtictn ____ 5 = ____: 5 90 do 0 - 995 1996 19970 998 1999 2000 1999 2000 000 2 0 pe'ces 650 70 'o--' 455 fi2obty 50p,obsb./y 350 ~ ~ ~ ~ ~~~~~~Orrb'r4502 rnso 250- Pr3 i onOn 1970 1990 29900 -I 20 0/7 99 0 00 20 0 *250 --- 750- Price in current 0 ice inpc rren_t dollars pdrklogran dollars pr metric tdn 200 /1 _ I 6 1,6 10o53~2-.~~.-~ ,. . I 29.0~~~~~~~~~~~~~~~~~5 _._ 195 199 99 i 99 199 995ret 1 1996 199 . 998 999 2 /990 Ibm ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~70p- 160 .AA0 'p.ob.blt8 rencntr rbbility 1970 1980 1990 2000 010 i970 980 1990 2000 2020 2 0 -C 30, 2.Price in curn___ 18dollars pekioga2 2. 1 8d=2 , , .1 6 14 . I- 8_ 12 13MMODI1Y MAPrice in c TOrrent JO eOUNE I0 ____ cents per kilogram________ 1995 1996 /997 i 998 / 999 2000 1995 1996 1997 99 / 1999 2000 32 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES COMMODITY PRICE OUTLOOK RUBBER Prices remain under AGRICUL- ; ~~~~~~~~~downward pressture TU R AL 400 70 percent 250 70 percent 32 io 200i ce Pricencnf pnbcbR 250 drcene150 nJ _ | RAW 1970 1980 990 200 2010 1970 1980 1990 2000 2010 MATERIALS ;250, ~ ---r-~---~ -175 213 70percent /50- - - probability 200K I disributnion ' !75 ' , I t ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~70 perce ;t 15~~~~~~5 i 50--- - , _ _ i _, _.d(b_ I Price in current Price in current I 1 cents per kilogram 50centsperkilogram Io0,- -----c tS0--u--_ 1995 1996 1997 1998 1999 2000 1995 1 996 1997 1998 1 999 2000 TIMBER Piesem to FERTILIZERS (MERANTI LOGS) .2 bottomotto U 500, ,70 percent 300 Price t constant 70 percent 400 Prce in cnnstnpb i_ pcobcbrit, 200' 1daprobb, 200 0,su boon m 6ntnlnobur . 200> 100 1970 1980 1990 2000 2010 1970 i900 1990 2000 2010 -2 75 ----- 7- - _-_..___._ 1 75 --- -__ _ 256 T / Price in current ~ 238 _ dollars per metric ton 2401-- 252.-}\---T---- ----- ,50 . . _ i _ _ 70 percent 205 -.- -nts--xnn on i , d'rns / 25ptt--i -- 1 2 170 t- - r - - - L < N /7 111 {llt 7i 1/35 , _ISS 155 /00 ----------- - __ IPrice in cfirrent I 1990 dolarsi --- - - - 7 976 t9/ 9 9 995 1 996 1 997 1 998 1 999 2000 PHOSPHATES . [UREA Prices to recover (TSP) 600 70 percent i 625 70 pe-cect 450 .Prce P ronnt .e prli fn copbr 300p mt- 25 I J9d dn_ dstt,o .970 190 990 2000 20,0 * 970 19&0 t990 2000 200 r __ !__ ___ -- p -r, 25 ;E S 176 ' 16~ ~ ~~~~~~~~~~~5 175---- - _ _ __ /65L L 2 ~ 1. 1650 - Price in c:rrent . Price in current 1 24 i dollars p nr metric t 1 _ j . , __ I O00dollars pqr metric to io 1995 /996 /997 /998 1999 2000 1995 1996 1997 1998 1999 2000 NOVEMBER 1 998 33 COMMODITY PRICE OUTLOOK METALS AND M I N E R ALS 2soo 70tercent 7r 500 di 0 2 . 0004,000. 1990 dollars ~~~~~~~~~~~~~~2,000 1970 1980 1990 2000 2010 1970 1980 990 A2000 20 Price in riurrent ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~NceinPurn dolar permetic rn 00tric-4---ton- 1700050 1995 1996 1997 t99 999 2000 1995 1996 1997 /998 1999 2000 1250 5 d0 * X - i Price, ions/n r 001Odolloe probmetriprbabtit 1970 190 0 2000 2000 .995 1980 1990 2000 2000 ivrbio 42 5 - 4,, - 34 COMMODTY MARKET AND THE EVELOPINGCO25T4 2 FPrice in current doll'rs per metrJ1c ton, dry weight 75 ~~~~~~37 - __ 75__228. Price in c rrent 225dllars pr troy oune ___ __ 22 ~ i I /995 i 996 1997 / 998 / 999 2000 / 995 /996 / 997 / 998 / 999 24000 34 COMMODITY MARKETS AND THE, DEVELOPING COUNTRIES COMMODITY PRICE OUTLOOK TABLE Al. COMMODITY PRICES AND PRICE PROJECTIONS IN CONSTANT 1990 DOLLARS Short-term Long-term Actuol projections projections Commod, Unit /970 /980 /985 /990 1994 1995 1996 /997 /998 /999 2000 2005 2010 Energy Coal, US $/mt - 59.88 6796 41.75 33.10 32.87 32.65 33.64 33.41 32.50 3 .92 29.77 28.12 Crude oil, avg. spot $/bbl 4.82 51.22 39.62 22.88 14.41 14.41 17.91 17.72 13.17 14.23 15.27 15.50 15.14 Natural gas, Europe $/mmbtu - 4.72 5.39 2.55 2.22 2.29 2.50 2.53 2.40 2.47 2.45 2.24 2.16 Natural gas, US $/mmbtu 0.68 2.15 3.57 1.70 1.74 1.44 2.40 2.29 2.12 2.04 1.94 1.92 1.87 Beverages Cocoa c/kg 269.1 361.7 328.6 126.7 126.7 120.2 127.7 149.6 163.5 167.0 173.0 165.6 157.9 Coffee, other milds c/kg 457.2 48 .6 470.9 197.2 300.1 279.5 236.4 385.2 275.9 241.0 224.8 207.1 191.1 Coffee, robusta c/kg 362.8 450.6 386.0 1 18.2 237.7 232.4 158.4 160.5 177.9 167.0 163.8 151.7 138.5 Tea, auctions (3), avg.a c/kg 332.9 230.5 255.0 205.8 135.4 124.9 145.7 190.4 194.2 1 69.9 163.8 167.2 152.9 Tea, Colombo auctions c/kg 249.9 154.4 212.3 187.7 120.8 1 19.3 165.7 186.7 199.0 172.7 167.5 170.5 158.7 Food Fats and oils Coconutoil $/mt 1,584 936.1 860.2 336.5 551.2 561.7 659.3 607.1 615.3 612.0 587.5 543.1 514.9 Copra $/mt 896.5 629.0 562.6 230.7 378.7 367.8 428.9 400.9 394.2 408.0 384.0 375.1 348.3 Groundnut meal $/mt 407.4 333.9 211.7 184.8 152.7 141.4 186.6 204.3 112.5 194.5 197.1 187.6 186.1 Groundnut oil $/mt 1,509 1,193 1.319 963.7 928.0 831.2 787.1 933.9 865.3 759.1 712.4 630.4 591.3 Palm oil $/mt 1.037 810.9 729.6 289.8 479.5 527.0 465.8 504.5 644.2 569.3 462.6 379.2 341.1 Soybean meal $/mt 409.0 364.6 229.1 200.2 174.6 165.2 234.7 254.9 158.6 156.6 166.5 206.3 196.9 Soybean oil $/mt 1,142 830.2 833.7 447.3 558.6 524.4 483.8 522.0 600.9 564.6 541.3 491.8 446.4 Soybeans $/mt 466.2 411.5 327.1 246.8 228.5 217.5 267.4 273.1 230.8 214.4 222.1 255.3 246.6 Grains Maize $/mt 232.9 174.0 163.6 109.3 97.6 103.6 145.5 108.2 96.1 98.7 101.8 107.4 99.9 Rice,Thai, 5% $/mt 503.6 570.6 287.0 270.9 242.8 269.2 297.3 280.5 302.9 301.7 296.1 277.1 267.0 Sorghum $/mt 206.5 179.0 150.1 103.9 94.3 99.8 131.6 101.3 93.3 96.7 98.7 104.1 96.9 Wheat,US,HRW $/mt 218.9 240.0 198.0 135.5 135.9 148.5 182.1 147.4 116.3 118.6 120.3 140.1 128.3 Other food Bananas $/mt 662.2 524.1 551.0 540.9 399.1 373.4 412.0 464.6 442.3 449.8 444.1 415.9 382.9 Beef, US c/kg 520.1 383.4 314.0 256.3 211.7 160.0 156.6 171.5 165.4 163.2 162.8 180.4 172.8 Oranges $/mt 670.0 556.0 580.7 531.1 373.2 445.8 431.3 424.2 446.1 472.5 485.8 461.7 437.0 Shrimp c/kg 1,108 ,421 1,529 1,079 1,186 1,136 1,151 1,365 1,404 1,433 1,369 1,280 1,204 Sugarworld c/kg 32.79 87.75 13.04 27.67 24.22 24.56 23.12 23.17 18.65 18.83 19.37 22.02 21.63 Agricultural raw materials; Timber Logs,Malaysia $/ml 172.0 271.6 177.4 177.2 279.1 214.4 221.2 220.2 149.0 147.1 157.3 187.6 209.1 Logs, Cameroon $/m3 171.5 349.7 253.4 343.5 299.7 284.8 238.3 237.9 240.4 223.0 235.9 281.4 310.1 Sawnwood, Malaysia $/m3 697.8 550.2 447.5 533.0 745.0 620.7 650.4 614.2 450.0 455.5 499.6 587.2 656.2 Other raw materials Cotton c/kg 269.7 286.5 192.1 181.9 160.0 178.5 155.6 161.5 144.2 142.3 145.3 159.8 149.3 Rubber RSS 1, Malaysia c/kg 162.4 197.9 1 10.6 86.5 102.2 132.5 122.3 94.1 70.0 75.3 79.6 88.5 85.7 Tobacco $/mt 4,290 3,162 3,807 3,392 2.395 2,214 2,676 3,261 3,077 2,799 2,776 2,650 2,380 Fertilizers DAP $/mt 215.3 308.7 246.3 171.4 156.8 181.7 187.0 184.8 197.1 189.8 183.2 164.5 145.7 Phosphate rock $/mt 43.9 64.9 49.4 40.5 29.9 29.4 34.2 37.9 41.3 40.8 39.8 35.9 33.2 PotassIum chloride $/mt 127.6 160.8 122.4 98.1 95.9 98.8 102.6 107.7 1 12.0 110.5 109.2 104.4 95.0 TSP $/mt 171.5 250.4 176.9 131.8 119.9 1 25.5 154.3 158.9 168.3 161.3 152.7 130.5 112.4 Urea $/mt 191.4 308.6 198.7 157.0 134.2 177.4 180.3 135.0 119.2 142.3 151.7 145.3 138.7 Metals and minerals Aluminum $/mt 2,217 2,023 1,517 1,639 1,340 1,515 1,321 1,478 1,327 1,385 1,406 1,448 1,424 Copper $/mt 5,645 3,032 2,066 2,661 2,094 2,463 2,013 2,104 1,610 1,613 1,633 1,656 1.623 Gold $/toz 143.5 844.7 463.4 383.5 348.4 322.3 340.1 306.0 283.6 294.2 296.1 281.4 266.8 Iron ore c/dmtu 39.23 39.02 38.71 30.80 23.11 22.61 25.06 26.69 28.55 28.47 28.22 25.77 23.58 Lead c/kg 120.8 125.8 57.0 81.1 49.7 52.9 67.9 57.7 51.0 52.2 53.7 50.6 46.5 Nickel $/mt I .348 9,056 7,140 8,864 5,752 6,902 6.580 6,403 4,423 4,270 4,626 5,403 5,156 Silver c/toz 705.7 2866.9 895.2 482.0 479.5 435.5 454.7 452.2 528.8 483.9 481.1 448.5 418.3 Tin c/kg 1,465 2,330 1,682 608.5 495.8 521.3 540.8 521.9 528.8 521.9 527.4 481.2 439.9 Zinc c/kg 118.0 105.8 114.2 15 1.4 90.5 86.5 89.9 121.7 98.6 04.4 106.4 99.9 90.1 - Not available. Note: Computed from unrounded data and deflated by MUV (1990=100). Forecast as of October 30, 998. a. London tea auctions were disconiriued on june 29, 1998. For details, see series description. Source: World Bank. Development Economics, Development Prospects Group. NOVEMBER 1998 35 COMMODITY PRICE OUTLOOK TABLE A2. COMMODITY PRICES AND PRICE PROJECTIONS IN CURRENT DOLLARS Short-term Long-term Actual projections projections Commodity Unit 1970 1980 1985 1990 1994 1995 1996 1997 1998 1999 2000 2005 2010 Energy Coal, US $/mt - 43.10 46.63 41.75 36.48 39.19 37.21 36.39 34.75 34.25 34.50 36.50 39.00 Crude oil, avg. spot $/bbl 1.21 36.87 27.18 22.88 5.89 17.17 20,42 19.17 13.70 /5.00 16.50 19.00 21.00 Natural gas, Europe $/mmbtu - 3.40 3.70 2.55 2.44 2.73 2.84 2.74 2.50 2.60 2.65 2.75 3.00 Natural gas, US $/mmbtu 0.17 1.55 2.45 1.70 1.92 1.72 2.73 2.48 2.20 2.15 2.10 2.35 2.60 Beverages Cocoa c/kg 67.5 260.4 225.4 126.7 139.6 143.2 145.6 16. .9 170.0 176.0 [87.0 203.0 219.0 Coffee, other milds c/kg 1 14.7 346.6 323.1 197.2 330.8 333.2 269.4 416.8 287.0 254.0 243.0 254.0 265.0 Coffee, robusta c/kg 91.0 324.3 264.9 118.2 262.0 277.1 180.6 173.6 185.0 176.0 177.0 1 86.0 192.0 Tea, auctions (3), avg.a c/kg 83.5 165.9 175.0 205.8 149.2 148.9 166.1 206.0 202.0 179.0 177.0 205.0 212.0 Tea, Colombo auctions c/kg 62.7 111.1 145.7 187.7 133.1 142.2 188.9 202.0 207.0 182.0 181.0 209.0 220.0 Food Fats and oils Coconut oi[ $/mt 397.2 673.8 590.2 336.5 607.5 669.6 751.6 656.8 640.0 645.0 635.0 666.0 71 4.0 Copra $/mt 224.8 452.7 386.0 230.7 417.3 438.5 488.9 433.8 410.0 430.0 415.0 460.0 483.0 Groundnut meal $/mt 102.2 240.3 145.3 184.8 /68.3 168.6 212.8 221.0 117.0 205.0 213.0 230.0 258.0 Groundnut oil $/mt 378.6 858.8 904.9 963.7 1022.8 990.9 897.3 1 0 0.4 900.0 800.0 770.0 773.0 820.0 Palm oil $/mt 260.1 583.7 500.6 289.8 528.4 628.3 530.9 545.8 670.0 600.0 500.0 465.0 473.0 Soybean meal $/mt 102.6 262.4 157.2 200.2 192.4 196.9 267.5 275.8 165.0 165.0 180.0 253.0 273.0 Soybean oil $/mt 286.3 597.6 572.0 447.3 6 15.6 625.1 551.5 564.8 625.0 595.0 585.0 603.0 6 1 9.0 Soybeans $/mt 116.9 296.2 224.4 246.8 251.8 259.3 304.8 295.4 240.0 226.0 240.0 313.0 342.0 Grains Maize $/mt 58.4 1 25.3 11 2.2 1 09.3 107.6 1 23.5 165.8 1 17.1 100.0 104.0 110.0 131.7 138.5 Rice,Thai,5% $/mt 126.3 410.7 196.9 270.9 267.6 321.0 338.9 303.5 315.0 318.0 320.0 339.8 370.3 Sorghum $/mt 51.8 1 28.9 103.0 103.9 103.9 1 19.0 150.0 109.6 97.0 101.9 106.7 127.7 134.3 Wheat, US, HRW $/mt 54.9 172.7 135.8 135.5 [49.7 177.0 207.6 159.5 121.0 125.0 130.0 71.8 177.9 Other food Bananas $/mt 166.1 377.3 378.1 540.9 439.8 445.1 469.6 502.7 460.0 474.0 480.0 5 10.0 53.1.0 Beef, US c/kg 130.4 276.0 215.4 256.3 233.3 190.7 178.5 185.5 172.0 172.0 176.0 221.2 239.6 Oranges $/mt 168.0 400.2 398.4 531.1 411.3 531.5 491.7 459.0 464.0 498.0 525.0 566.1 605.9 Shrimp c/kg 278.0 1,023 1,049 1,079 1,308 1,354 1,312 1,476 1,460 1,510 1,480 1,570 1,670 Sugar world c/kg 8.22 63.16 8.95 27.67 26.70 29.28 26.36 25.06 19.40 19.84 20.94 27.00 30.00 Agricultural raw materials Timber Logs, Malaysia $/m3 43.1 195.5 121.7 177.2 307.6 255.6 252.1 238.3 155.0 155.0 170.0 230.0 290.0 Logs, Cameroon $/mi 43.0 251.7 173.9 343.5 330.3 339.5 271.6 257.4 250.0 235.0 255.0 345.0 430.0 Sawnwood, Malaysia $/m3 175.0 396.0 307.0 533.0 821.0 740.0 741.4 664.5 468.0 480.0 540.0 720.0 910.0 Other raw materials Cotton c/kg 67.6 206.2 131.8 181.9 176.3 212.8 177.3 174.8 [50.0 [50.0 157.0 196.0 207.0 Rubber, RSS 1, Malaysia c/kg 40.7 142.5 75.9 86.5 1 [2.6 158.0 139.4 101.8 72.8 79.4 86.0 108.5 1 18.8 Tobacco $/mt 1,076 2,276 2,612 3,392 2,639 2,639 3,051 3,529 3,200 2,950 3,000 3,250 3,300 Fertilizers DAP $/mt 54.0 222.2 169.0 171.4 172.8 216.6 213.2 199.9 205.0 200.0 198.0 201.8 202.0 Phosphate rock $/mt /1.0 46.7 33.9 40.5 33.0 35.0 39.0 41.0 43.0 43.0 43.0 44.0 46.0 Potassium chloride $/mt 32.0 115.7 84.0 98.1 105.7 117.8 1 16.9 1 16.5 1 16.5 1 16.5 1 18.0 128.0 131.8 TSP $/mt 43.0 180.3 121.4 131.8 132.1 149.6 175.8 171.9 175.0 170.0 165.0 160.0 155.8 Urea $/mt 48.0 222.1 136.3 157.0 147.9 21 1.5 205.5 146.1 124.0 150.0 164.0 178.2 192.4 Metals and minerals Aluminum $/mt 556 1,456 1,041 1,639 1,477 1,806 1,506 1,599 1,380 1,460 1,520 1,775 1,975 Copper $/mt 1,416 2,182 1,417 2,661 2,307 2,936 2,295 2,277 1,675 1,700 1,765 2,030 2,250 Gold $/toz 36.0 608.0 317.9 383.5 384.0 384.2 387.7 331.1 295.0 310.0 320.0 345.0 370.0 Iron ore c/dmtu 9.84 28.09 26.56 30.80 25.47 26.95 28.57 28.88 29.69 30.00 30.50 31.60 32.70 Lead c/kg 30.3 90.6 39.1 81.1 54.8 63.1 77.4 62.4 53.0 55.0 58.0 62.0 64.5 Nickel $/mt 2,846 6,519 4,899 8,864 6,340 8,228 7,501 6,927 4,600 4,500 5,000 6,625 7,/50 Silver c/toz 177.0 2,064 614.2 482.0 528.4 519.1 518.3 489.2 550.0 510.0 520.0 550.0 580.0 Tin c/kg 367.3 1,677 1,154 608.5 546.4 621.4 616.5 564.7 550.0 550.0 570.0 590.0 610.0 Zinc c/kg 29.6 76.1 78.3 151.4 99.8 103.1 102.5 131.6 102.5 110.0 115.0 [22.5 125.0 - Not availab e. Note Computed from unrounded data and deflated by MUV ( 1990=100). Forecast as of October 30, 1998. a. London tea auctons were discontirued on June 29, 1998. For details, see series description. Source: World Bank Development Economics, Development Prospects Group. 36 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES COMMODITY PRICE OUTLOOK TABLE A3. WEIGHTED INDEX OF COMMODITY PRICES IN CURRENT DOLLARS AND IN CONSTANT 1990 DOLLARS 1990= iO _ Agriculture Nonenergy Food Row matenols Metals cornmod- Total Total Other Totsi raw and Energy ties agriculture Beverages food Fats ond oils Grains foods moterials Timber Fertilizers minerals Sear (100) (i OO), (69. 1)" (1 6.9) (29.4)1 (I0. ])a (6.9)' (l 2.4)a (22.8)' (9,3)d (2.7)' (28.2)a Current dollars 1980 161.2 25.9 138.3 182.4 139.3 148.7 134.3 1343 104.6 79.0 128.9 95.1 1985 118.8 91.4 100.2 164.1 86.3 113.0 89.2 . 62.8 70.8 59.1 89.0 70.2 1990 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 1992 83.1 91.8 94.0 77.5 100.0 111.7 101.7 89.5 98.3 114.5 95.8 86.1 1993 73.6 91.4 98.8 83.6 98.6 111.5 93.7 90.7 110.3 152.4 83.7 73.9 1994 69.4 . 11.6 123.3 148.8 106.8 125.9 102.1 93.9 125.8 156.6 93.4 84.6 1995 75.1 122.2 131.3 151.2 116.9 136.6 120.4 98.8 135.2 139.5 103.6 101.6 1996 89.3 115.1 125.5 126.5 123.6 147.0 140.6 95.0 127.1 139.5 119.8 89.1 1997 83.8 117.6 128.7 171.0 116.1 147.7 112.1 92.4 13.7 125.8 119.7 90.2 1998 59.9 99.1 107.5 141.1 104.6 131.0 101.4 84.8 86.3 87.3 123.0 76.3 1999 65.6 96.9 103.5 124 6 103.5 123.8 103.8 86.6 88.0 89.7 120.6 78.3 2000 72.1 99.0 105.4 122.0 103.8 119.7 106.8 89.0 95.2 100.6 118.2 81.3 2005 83.0 112.0 120,2 213 1 8.9 138.6 124.5 99.7 120.8 134.4 116.7 91.6 2010 91.8 120.2 129.0 122.6 124.5 147.0 132.4 101.6 139.5 169.8 116.5 99.2 Constont 1990 dollors 1980 223.9 74.9 192.2 253.4 193.5 206.6 186.6 186.6 145.3 109.8 179.1 [32.1 1985 173.2 133.3 146.0 239.2 125.8 164.7 130.1 91.5 103.3 86.1 129.8 102.3 1990 100.0 100.0 100.0 [00 0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 1992 78.0 86.1 88.1 72 6 93.8 104.7 95.4 84.0 92.2 107.3 89.8 80.8 1993 69.2 85.9 92.9 78.6 92.7 [04.9 88.1 85.3 103.7 143.3 78.7 69.5 1994 63.0 101.3 111.9 135.0 96.9 114.3 92.6 85.2 114.2 142.1 84.7 76.8 1995 63.0 102.5 110.2 126.8 98.1 114.6 101.0 82.9 113.4 1I17.1 86.9 85.2 1996 78.3 101.0 110.1 110 9 108.5 129.0 123.3 83.3 111.5 122.4 105.1 78.2 1997 77.5 108.7 119.0 158.1 107.3 [36.6 103.6 85.4 105.1 116.3 110.7 83.4 1998 57.6 95.3 103.3 135.7 100.6 126.0 97.5 81.5 83.0 83.9 118.3 73.3 1999 62.2 91.9 98.2 118.2 98.2 117.4 98.5 82.2 83.5 85.1 1 14.4 74.3 2000 66.7 91.6 97.5 1 12.9 96.0 110.8 98.8 82.4 88.1 93.1 109.4 75.2 2005 67.7 91.4 98.0 98.9 97.0 I 13.1 101.5 81.3 98.5 109.6 95.2 74.7 2010 66.2 86.7 93.0 88.4 89.8 106.0 95.4 73.3 100.6 122.4 84.0 71.5 Note Figures for 1998-2010 are projectons.Weigrts useo are the average 1987-89 export values for low- and middle-income economies. Forecast as of October 30, 1998. a. Percentage share of commodty grcup n nonenergy ndex. Source: World Rank, Deve opment Economics, Development Prospects Group. TABLE A4. INFLATION INDICES FOR SELECTED YEARS G-5 MUV index' US GDP deflator YeGr 1 990=100 s change 1990= 100 % change 1980 71.98 64.53 1985 68.61 -0.95 83.76 5.36 1990 100.00 7.83 100.00 3.61 1991 102.23 2.23 103.95 3.95 1992 [06.64 4.31 106.84 2.77 1993 1 C6.33 -0.29 109.66 2.64 1994 110.21 3.65 112.28 2.39 1995 119.21 8.17 115.13 2.54 1996 113.99 -4.38 117.75 2.27 1997 108.19 -5.09 120.09 1.99 1998 104.01 -3.87 122.01 1.60 1999 105.39 1.32 124.32 1.90 2000 108.08 2.56 127.43 2.50 2005 122.62 2.56 141.80 2.16 2010 138.67 2.49 157.33 2.10 Note: Figures for 1998-20 10 ame projections. For 1997, US GDP deflator is actual: MU.V is a pre minary estmate. Forecast as of September 30, 1998. Growth rates for years 1985, 1990. 2000, 2005 and 2010 are compound annual rates of change between adjacent end-point years: al others ame annual growth rates from the previous year a. Unit value Index in US collar terms of manufactunes exported from the G S countries (France, Germany, Japan, UK, and US), weighted propormonalHy to the countries' exports to the develop ng countries. Source: G-S MUV index. G-S GDP/GNP deflaor and G-7 CP World Bank US GDP deflator: US Department of Commerce. NOVEMBER 1998 37 COMMODITY PRICE OUTLOOK TABLE A5. COMMODITY PRICE PROBABILITY DISTRIBUTIONS IN CONSTANT 1990 DOLLARS 70% probobility distribution Commodity Unit 1998 1999 2000 2005 Energy Coal, US $/mt 31.74-35.08 25.88-39.1 23.71-40.13 18.65-40.88 Crude oil,avg.spot $/bbl 12.23-14.11 10.74-17.72 10.33-20.21 8.97-22.02 Natural gas, Europe $Immbtu 2.28-2.52 2.02-2.92 1.90-2.96 1.47-3.02 Natural gas, US $/mmbtu 2.00-2.24 1.63-2.54 1.39-2.50 1.14-2.69 Beverages Cocoa Okg 155-172 135-199 130-217 116-215 Coffee, other milds #kg 262-290 195-286 168-280 145-270 Coffee, robusta ¢/kg 169-187 135-199 123-205 106-197 Tea, auctions (3), avg. Wkg 185-204 138-202 123-205 117-217 Tea, Colombo auctions, all ¢/kg 189-209 137-210 127-211 112-241 Food Fats and oil Coconut oil $/mt 585-646 496-728 440-735 380-706 Copra $/mt 374-414 330-486 288-480 263-488 Groundnut meal $/mt 107-118 158-23 1 148-246 13 1-244 Groundnut oil $/mt 822-909 615-903 535-891 441-820 Palm oil $/mt 612-676 461-677 347-578 266-493 Soybean meal $/mt 151-167 127-186 125-208 144-268 Soybean oil $/mt 571-631 457-672 406-677 344-639 Soybeans $/mt 219-242 174-255 167-278 179-332 Grains Maize $/mt 90-102 78-120 77-128 70-150 Rice,Thai,5% $/mt 285-321 233-371 213-385 166-388 Sorghum $/mt 88-99 76-118 75-124 68-146 Wheat, US, HRW $/mt 109-123 89-150 87-156 87-196 Other food Bananas $/mrt 420-464 364-535 333-554 291-542 Beef, US ¢/kg 155-175 130-197 122-204 121-240 Oranges $/mt 424-468 356-580 350-627 309-614 Shrimp ¢/kg 1,334-1,474 1,161-1,705 1,041-1,698 896-1,664 Sugar, world ¢/kg 17.53-19.77 14.98-22.67 14,53-24.22 14.75-29.29 Agricultural raw materials Timber Logs,Malaysia $/m3 140-158 114-181 113-201 113-263 Logs, Cameroon $/m3 226-255 168-278 165-307 163-400 Sawnwood, Malaysia $/m3 423-477 352-559 360-640 352-822 Other raw materials Cotton ¢/kg 137-151 115-169 109-182 112-208 Rubber; RSS l, Malaysia f/kg 66-73 61-90 59-99 62-115 Tobacco $/mt 2,923-3,230 2,227-3,371 2,082-3,470 1,776-3,525 Fertilizers DAP $/mt 187-207 147-233 132-238 107-222 Phosphate rock $/mt 39-44 31-50 29-52 23-48 Potassium chloridea $/mt 106-118 85-136 79-142 63-146 TSP $/mt 160-177 125-198 110-198 78-183 Urea $/mt 113-125 110-175 109-197 87-203 Metals and minerals Aluminum $/mt 1,256-1,398 1,056-1,714 934-1,878 869-2,027 Copper $/mt 1,526-1,695 1,231-1,995 1,101-2,165 979-2,324 Gold $/toz 269-298 227-362 199-393 171-391 Iron ore ¢/dmtu 28.19-28.90 23.06-33.87 20.36-36.08 17.13-34.25 Lead f/kg 48-54 40-64 36-71 30-71 Nickel $/mt 4,179-4,666 3,236-5,304 3,099-6,154 3,242-7,564 Silver f/toz 502-556 368-600 321-642 269-628 Tin ¢/kg 500-558 396-648 352-703 285-677 Zinc ¢/kg 93-104 79-130 71-142 60-140 Note: Forecast as of October 30, 1998, a.Also known as muriate of potash. Source. World Bank Developmerst Economics, Development Prospects Group. 38 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES COMMODITY PRICE OUTLOOK TABLE A6. COMMODITY PRICE PROBABILITY DISTRIBUTIONS IN CURRENT DOLLARS 70% prbobility distribution Commodity, Unit 1998 1999 2000 2005 Energy Coal, US S/mt 33.01-36.49 27.28-41.22 25.63-43.37 22.87-50.13 Crude oil, avg. spot S/bbl 12.72-14.68 11.32-18.68 11.16-21.84 11.00-27.00 Natural gas, Europe 5/mmbtu 2.38-2.63 2.13-3.08 2.05-3 20 1.80-3.70 Natural gas, US $/mmbtu 2.08-2.33 1.72-2.67 1.50-2.70 1.40-3.30 Beverages Cocoa gkg 162-179 142-210 140-234 142-264 Coffee, other milds /kg 273-301 206-301 182-303 178-331 Coffee, robusta ¢/kg 176-194 143-210 133-222 130-242 Tea, auctions (3), avg. ¢/kg 192-212 145-213 133-221 144-266 Tea, Colombo auctions, all ¢/kg 197-217 144-222 138-228 137-295 Food Fats and oil Coconut oil $/mt 608-672 522-768 476-794 466-866 Copra $/mt 390-431 348-512 31H-519 322-598 Groundnut meal $/mt I 11-123 166-244 160-266 161-299 Groundnut oil $/mt 855-945 648-952 578-963 541-l.005 Palm oii $/mt 637-704 486-714 375-625 326-605 Soybean meal $/mt 157-173 134- 196 135-225 177-329 Soybean oil $/mt 594-656 482-708 439-731 422-784 Soybeans $/mt 228-252 183-269 180-300 219-407 Grains Maize $/mt 94-106 82 127 84-139 86-184 Rice,Thai, 5% $/mt 296-334 245-391 230-416 204-476 Sorghum $/mt 91-103 81-124 81-134 83-179 Wheat, US, HRW $/mt 114-128 94-158 94- 1 69 107-241 Other food Bananas $/mt 437 483 384-564 360-599 357-664 Beef, US ¢/kg 162-182 137-207 132-220 148-294 Oranges $/mt 441-487 375-612 378-677 379 753 Shrimp ¢/kg 1,387-1,533 1,223-1,797 1,125-1,835 1,099-2,041 Sugar world ¢/kg 18.24-20.56 1 5.79-23.89 15.71-26.18 1 8.09-35.91 Agricultural raw materials Timber Logs, Malaysia $/m3 146-164 120-190 122-218 138-322 Logs, Cameroon $/m3n 235-265 177-293 179-332 200-490 Sawnwood, Malaysia $/m3 440-496 371-589 389-691 432-1,008 Other raw materials Cotton ¢/kg 143-158 122-179 118-196 137-255 Rubber, RSS l,Malaysia ¢kg 69-76 64-95 64-107 76- 141 Tobacco $/mt 3,040-3,360 2,347-3,553 2,250-3,750 2,178-4,323 Fertilizers DAP $/mt 195-215 154-246 143-257 131-272 Phosphate rock $/mt 40-46 33-53 31-56 29-59 Potassium chloridea $/mt 111-122 90-143 85-153 77-179 TSP $/mt 166-184 131-209 19-215 96-224 Urea $/mt 118-130 1 16-184 118-213 107-249 Metals and minerals Aluminum $/mt 1,306-1,454 1,113-1,807 1,010-2,030 1,065-2,485 Copper $/mt 1,587-1,763 1,297-2,103 1,190-2,340 1,200-2,850 Gold $/toz 280-310 239-381 215-425 210-480 Iron ore ¢/dmtu 29.32-30.06 24.30-35.70 22.00-39.00 21.00-42.00 Lead ¢/kg SO.11-55.89 42.17-67.83 39.00-77.00 37.20-86.80 Nickel $/mt 4,347-4,853 3,410-5,590 3,349-6,651 3,975-9,275 Silver ¢/toz 522-578 388-632 347-693 330-770 Tin ¢/kg 520-580 417-683 380-760 350-830 Zinc ¢/kg 97-108 83-137 77-153 74-172 Note; Forecast as of October 30, 1998. a.Also known as muriate of potash. Source World Bank Development Economics, Development Prospects Group. NOVEMBER 1998 39 COMMODITY PRICE OUTLOOK TABLE A7. RECENT COMMODITY PRICES Annual averages Quarterly averages Monthly overoges Jan-Dec Jan-Dec Jan-Sep Jul-Sep Oct-Dec Jan-Mar Apr-Jun jul-Sep jul Aug Sep Commodity unit 1996 / 997 1998 / 997 / 997 /998 /998_ / 998 / 998 /998 1998 Energy Coal,Australia $/mt 38.07 35.10 30.16 36.36 34.05 32.24 30.49 27.76 30.00 26.20 27.09 Coal, US $/mt 37.21 36.39 34.68 35.26 35.66 35.24 34.76 34.04 34.63 34.00 33.50 Crude oil, average spot0 $/bbl 20.42 19.17 13.48 18.56 18.74 14.07 13.36 13.01 12.70 12.49 13.83 Brent0 $/bbl 20.65 19.09 13.26 18.52 18.62 14.08 13.29 12.42 12.01 11.88 13.36 Dubai' $/bbl 18.54 18.10 12.31 17.67 17.87 12.44 12.08 12.41 1 1.98 12.18 13.07 WestTexas Int.0 $/bbl 22.07 20.33 14.83 19.50 19.73 15.69 14.64 14.16 14.11 13.40 14.98 Natural gas, Europe $/mmbtj 2.84 2.74 2.50 2.68 2.65 2.63 2.52 2.37 2.40 2.37 2.33 Natural gas, US $/mmbtj 2.73 2.48 2.15 2.50 2.80 2.18 2.24 2.01 2.17 1.85 2.01 Beverages Cocoab c/kg 145.6 161.9 170.5 169.9 172.5 167.8 174.2 169.5 171.7 168.3 168.6 Coffee OtherMilds5 cdkg 269.4 416.8 313.4 419.7 371.4 377.5 303.5 259.2 259.3 271.6 246.6 Robusta5 c/kg 180.6 173.6 183.1 168.5 171.3 183.0 192.9 173.5 169.8 174.8 175.9 Tea Auctions (3), averageb c/kg 168.9 210.2 215.9 222.5 235.5 250.8 202.5 194.5 198.1 /96.3 188.9 Colombo auctionsb c/kg 188.9 202.0 216.5 207.6 224.2 236.0 215.3 198.2 197.9 206.1 190.7 Mombasaauctions5 cfkg 142.3 201.5 197.9 209.9 233.5 254.8 169.0 170.0 168.3 170.2 171.5 Food Fats ond Oils Coconut oil' $/mt 751.6 656.8 630.4 593.0 609.7 565.0 664.3 662.0 667.0 667.0 652.0 Copra $/mt 488.9 433.8 395.0 395.7 406.0 375.7 404.7 404.7 402.0 403.0 409.0 Groundnut meal $/mt 212.8 221.0 / 19.9 220.7 175.7 137.3 1 14.3 108.0 1 10.0 107.0 107.0 Groundnut i0b $/mt 897.3 1010.4 926.7 1090.7 1077.0 /011.0 906.3 862.7 874.0 862.0 852.0 Palm oilb $/mt 530.9 545.8 669.6 509.0 556.3 650.3 675.3 683.0 661.0 674.0 714.0 Soybean mealb $/mt 267.5 275.8 173.6 257.3 266.7 209.7 162.0 149.0 157.0 145.0 145.0 Soybean oil' $/mt 551.5 564.8 632.4 544.7 636.3 637.0 654.0 606.3 612.0 592.0 615.0 Soybeans' $9mt 304.8 295.4 247.4 280.0 283.3 270.3 247.7 224.3 238.0 219.0 216.0 Grains Maizeb $/mt 165.8 1 17.1 103.8 1 10.4 1 17.0 114.1 105.8 91.6 100.5 87.9 86.3 Rice Thai, 5%5 $/mt 338.9 303.5 31 1.5 291.9 262.6 293.8 3 18.4 322.3 324.3 321.4 32 1.3 Thai, 35% $/mt 275.8 246.8 249.1 241.3 222.9 235.3 249.7 262.5 254.5 264.4 268.5 Thai,AI Special $/mt 232.7 210.4 204.9 209.3 189.5 188.2 199.8 226.7 21 1.0 228.8 240.3 Sorghum' $/mt 150.0 109.6 100.7 102.4 111.8 1 / 1.2 100.4 90.5 95.4 91.0 85.0 Wheat Canada $/mt 230.8 181.4 /62.3 178.6 172.7 168.7 165.3 153.0 158.5 151.4 149.1 US,HRW0 $/mt 207.6 159.5 125.6 146.2 148.7 138.7 126.6 1 1 1.6 1 18.9 108.0 107.9 US, 5RW $/mt 1 87.4 1 43.7 1 12.4 137.3 1 39.2 1 29.1 1 12.6 95.3 96.8 92.9 96.3 Other food Bananas' $/mt 469.6 502.7 482.1 423.9 404.8 422.2 567.5 456.5 560.0 390.5 418.9 BeefP ckg 178.5 185.5 174.7 180.0 181.7 181.3 176.1 166.7 166.7 168.0 165.5 Fishmeal $/mt 586.0 606.3 682.1 6/3.0 698.3 694.7 681.3 670.3 660.0 670.0 681.0 Lamb c/kg 329.5 339.3 278.6 326.0 333.0 312.5 272.3 251.1 242.5 245.2 265.6 Orangesb $/mt 491.7 459.0 451.8 544.7 420.5 388.2 450.1 S17.1 542.9 508.0 500.3 Shrimp c/kg 1311.9 1476.3 1492.9 1531.6 /516.5 1539.3 1566.2 1373.3 /430.3 1377.9 1311.8 Sugar EU, domesticb c/kg 68.31 62.72 59.37 60.49 60.50 59.94 59.59 58.59 58.35 57.83 59.59 US,domesticb c/kg 49.29 48.36 48.77 48.93 48.52 48.05 49.15 49.10 49.98 48.98 48.35 Woridb c/kg 26.36 25.06 20.45 25.17 26.27 23.57 19.85 17.92 19.01 18.82 15.94 Agricultural Raw Materials Timber Logs Malaysia' $/m3 252.1 238.3 1 62.6 243.8 217.8 1 96.9 150.2 140.7 135.0 136.9 150.2 Cameroon $/rm3 271.6 257.4 249.8 246.8 255.0 246.0 249.4 254.0 248.9 250.2 262.8 Plywood c/sheet 529.5 485.0 370.5 497.3 439.5 403.6 361.1 346.8 348.5 335.3 356.6 Sawnwood Malaysiab $/m3 741.4 664.5 472.3 650.0 509.4 474.6 476.7 465.5 437.5 455.6 503.5 Ghana $im3 540.8 567.5 536.4 566.4 578.3 561.6 529.3 518.2 516.7 512.7 525.2 Woodpulp $/mt 574.1 556.5 528.2 573.9 597.0 527.5 540.5 51 6.6 533.9 507.9 507.9 40 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES COMMODITY PRICE OUTLOOK TABLE A7. RECENT COMMODITY PRICES Annual overoges Quarterly overages Monthly overoges Jon-Dec Jon-Dec Jon-Sep Jul-Sep Oct-Dec Jan-Mor Apr-Jun Jul-Sep Jul Aug Sep Commodity Unmt 1996 1 997 1998 1997 1997 1998 1998 1998 1998 1998 1998 Other Raw Materials Cotton' c/kg 177.3 174.8 150.1 178.0 168.5 153.9 146.2 150.2 154.0 150.3 146.4 jute $/mt 457.5 304.6 254.0 287.2 242.3 243.3 258.8 260.0 260.0 260.0 260.0 Rubber Malaysia' c/kg 139.4 101.8 72.7 90.8 81.3 74.8 75.3 68.0 70.3 65.4 68.3 NY c/kg 160.7 121.6 90.3 114.9 103.3 92.8 92.0 86.1 88.1 85.1 85.2 Singapore c/kg 140.9 101.0 71.6 90.8 80.8 73.1 73.4 68.3 72.1 64.5 68.4 Sisal $/mt 868.3 776.6 81 1.1 767.5 760.0 778.3 805.0 850.0 850.0 850.0 850.0 Wool c/kg 416.3 430.3 341.9 441.4 412.9 374.3 350.8 300.6 327.9 288.3 285.7 Fertilizers DAP $1mt 213.2 199.9 203.1 199.2 200.1 194.6 205.3 209.5 208.9 2 0.0 209.5 Phosphate rock' $/mt 39.0 41.0 43.0 41.0 41.0 43.0 43.0 43.0 43.0 43.0 43.0 Potassium chloride $/mt 116.9 116.5 1 16.5 116.5 116.5 116.5 116.5 116.5 116.5 116.5 116.5 TSPb $/mt 175.8 171.9 175.3 165.1 168.7 172.5 175.9 177.5 177.5 177.5 177.5 Urea $/mt 205.5 146.1 126.0 131.2 128.9 128.5 129.0 120.5 119.7 122.3 1 19.5 Metals and Minerals Aluminumb $/mt 1505.7 599.3 1382.4 1637.7 1579.1 1463.0 1363.4 1320.8 1309.2 1310.9 1342.3 Copper" $/mt 2294.9 2276.8 690.5 2269.7 1910.7 1700.4 1731.3 1639.9 1651.0 1620.9 1647.6 Gold $/toz 387.7 331.1 294.2 323.6 306.6 294.2 299.9 288.7 292.9 284.1 289.0 Iron ore' c/dmtu 28.57 28.88 29.69 28.88 28.88 29.69 29.69 29.69 29.69 29.69 29.69 Lead' c/kg 77.4 62.4 54.0 62.6 56.3 53.6 54.8 53.4 54.6 53.7 52.0 Nickeli $/mt 7500.8 6927.4 4852.5 6700.2 6155.1 5424.8 4963.2 4169.4 4325.4 4080.6 4102.2 Silver c/toz 518.3 489.2 572.7 453.3 526.2 624.8 571.2 522.0 546.8 516.5 502.7 Steel products (8) ndex' 1 990= 100 96.3 89.1 76.8 90.7 84.5 80.4 76.7 73.4 74.8 73.7 71.7 Steel Cold rolled coilsheet $/mt 483.9 448.2 387.8 459.3 443.3 416.7 386.7 360.0 370.0 360.0 350.0 Hot rolled coilsheet $/mt 365.6 337.3 293.3 347.3 330.0 316.7 293.3 270.0 280.0 270.0 260.0 Rebar $/mt 360.2 325.2 263.3 324.0 306.7 296.7 260.0 233.3 240.0 230.0 230.0 Wire rod $/mt 438.5 382.7 333.9 397.3 346.7 328.3 336.7 336.7 330,0 340.0 340.0 Tinb c/kg 616.5 564.7 559.1 545.6 557.8 530.9 585.3 561.0 565.4 569.2 548.6 Zinc' c/kg 102.5 131.6 104.7 160.4 118.5 106.3 105.6 102.3 104.0 103.0 100.0 World Bank commodity price indices for low and middle income countries ( 1990 = 100) Petroleum 89.3 83.8 59.8 81.1 81.9 61.5 58.4 56.9 55.5 54.6 60.5 Nonenergy Commodities 115.1 117.6 99.9 1 15.9 109.4 106.0 101.0 95.3 96.3 94,9 94.8 Agriculture 125.5 128.7 108.4 125.9 1 19.3 1 16.5 109.7 102.7 103.9 (02.2 101.8 Beverages 126.5 171.0 142.4 173.6 162.1 164.9 144.1 129.0 129.3 132.4 125,4 Food 123.6 1 16.1 105.1 110.2 1 12.0 109.1 106.9 101.2 104.8 99.4 99.6 Fatsand Oils 147.0 147.7 131.5 138.4 146.3 140.0 132.5 127.5 128.8 125.4 128.4 Grains 140.6 1 12.1 103.4 105.7 103.6 105.7 104.5 98.3 102.4 96.6 95.9 Other food 95.0 92.4 84.4 89.7 88.7 85.8 87.3 81.4 86.5 79.7 78.0 Raw materials 127.1 113.7 87.5 111.0 97.1 90.3 87.7 85.0 84.1 83.6 87.3 Timber 139.5 125.8 88.0 124.0 98.7 91.9 88.8 86.3 81.3 84.4 93.2 Other raw materials 1 18.7 105.5 87.2 102.1 96.1 89.2 87.0 84.2 86.0 83.1 83.4 Fertilizers 1 19.8 1 19.7 123.7 1 16.4 118.2 121.8 123.4 124.2 124.2 124.2 124.2 Metals and Minerals 89.1 90.2 77.0 91.3 84.1 78.7 77.4 74.5 74.7 74.1 74.7 Note: Prices as of October 6, 1998. Monthly updates of commodity prices are available on the World Wide Web at http://www.worldbank.org/prospects a. Included in the petroleum index. b. Incuded In the nonenergy index. c. Steel not included in the nonenergy index. Source: World Bank Development Economics, Development Prospects Groups. NOVEMBER 1998 41 COMMODITY PRICE OUTLOOK COMMODITY DESCRIPTIONS Energy Sugor (world), International Sugar Agreement (ISA) daily price, raw, fo.b. and stowed Cool (Australian), thermal, 12,000 btu/lb, less than 1.0% sulfur 14% ash, fo.b. piers, at greater Caribbean ports Newcastle/Port Kembla Agricultural raw materials Coal (US), thermal, 12,000 btu/lb, less than 1.0% sulfur, 12% ash, f o.b. piers, Hampton Timber Road/Norfolk Logs (Moloysion), meranti, Sarawak, sale price charged by importers,Tokyo; prior to Crude oil (spot), average spot price of Brent, Duoai and WestTexas Intermediate, February 1993, average of Sabah and Sarawak weighted by Japanese import equally weighed volumes Crude oil (spot), U.K. Brent 380 API, fo.b. UK ports Logs (VWestAfrican), sapelli, high quality (loyal and marchand), fo.b. Cameroon Crude oil (spot), Dubai Fateh 320 API, f o.b. Dubai Plywood (Southeost Asian), Lauan, 3-ply, extra, 91 m3 x 182 m3 x 4 mm, wholesale Crude oil (spot), West Texas Intermediate (WTI) 40' API, fo.b. Midland Texas price, spotTokyo Natural Gos (Europe), average import border price Sownwood (Malaysian), dark red seraya/rneranti, select and better quality, General Noturol Gos (U.S.), spot price at Henry Hub, Louisiana Market Specification (GMS), width 6 inches or more, average 7 to 8 inches; Beverages length 8 inches or more, average 12 to 14 inches; thickness I to 2 inch(es); kiln Cocoo (ICCO), International Cocoa Organization daily price, average of the first three dry, c&f UK ports positions on the terminal markets of NewYork and London nearest three future Sawnwood (Ghanaian), sapele, bundled, fba trading months Woodpulp (Swedish), softwood, sulphate, bleached, air-dry weight, c.i.f North Sea Coffee (ICO), International Coffee Organization indicator price, other mild Arabicas, ports average NewYork and Bremen/Hamburg markets, ex-dock Otton (oo m utooiAin Coffee (ICO), International Coffee Organization indicator price, Robustas, average Corton (cotton outookA index), middling 1-3/32 inch, c.i.f Europe NewYork and Le Havre/Marseilles markets, ex-dock Jute (Bongladesh), raw, white D, f Mo.b. Chittagong/Chalna Tea (Average 3 auctions,), leaf at Calcutta auction, and all tea at Colombo and Board, Moidday buyerSS asking pe fMaaysian Rubber E3 hange & Licensing Nairobi/Mombassa auctions; arithmetic averages of weekly quotes Lumpur Tea (Colombo ouctions), all tea; anthmetic averages of weekly quotes Rubber (any origin), RSS no. I, in bales, RubberTraders Association (RTA), spot, New Tea (Mombosn/Noirobi oictions), African origin, all tea, arithmetic averages of weekly York quotes Rbe Rubber (Asian), RSS no. I, in bales, Rubber Association of Singapore Commodity Foods Exchange (RASCE)/ Singapore Commodity Exchange, midday buyers' asking Fats and oils price for prompt or 30 days delivery; prior to June 1992, spot, Singapore Coconut oil (Philippines/lndonesion), bulk, c.i.f Rotterdam Sisol (EastAfricon), UG (rejects), c.i.f. UK Copra (Philippines/lndonesion), bulk, c.i.f NW. Europe Wool (Dominion), crossbred, 56's, clean, c.i.f UK Groundnut meal (Argentine), 48/50%, c.i.f Rotterdam Fertilizers Groundnut oil (ony origin), c.i.f Rotterdam DAP (diammonium phosphote), bulk, spot, fo.b. US Gulf Palm oil (Moloysion), 5% bulk, e.r.o N.Wc urope Phosphate rock (Moroccan), 70% BPL, contract, fa.s. Casablanca Soybean meal (any origin), Argentine 45/46% extraction, c.i.4 Rotterdam; prior to Potossium chloride (rnuriote of potash), standard grade, spot, fo.b.Vancouver 1990, US 44% TSP (triple superphosphote), bulk spot, fo.b. US Gulf Soybeon oil (Dutch), crude, fo.b. ex-mill Ureo (varying origins), bagged, spot, fob.WeSt Europe Soybeans (US), c.i.f Rotterdam Grains Metals and minerals Moize (US), no. 2, yellow, fo.b. US Gulf ports Aluminum (LME) London Metol Exchange, unalloyed primary ingots, high grade, mini- Rice (Thai), 5% broken, WR, milled, indicative market price based on weekly surveys mum 99.7% purity, cash price of export transactions (indicative survey price), government standard, fo.b. Copper (LME), grade A, minimum 99.9935% purity, cathodes and wire bar shapes, Bangkok settlement price Rice (Thai), 35% broken,WR, milled, indicative survey pnce, government standard, Gold (UK), 99.5% fine, London afternoon fixing, average of daily rates fo.b. Bangkok Iron ore (Brazilian), CVRD Southern System standard sinter fines (SSF), 64.2% Fe Rice (Thoi), 100% broken, A. I Special, broken kernel obtained from the milling of (iron) content (dry weight) ores, moisture content 6.5%, contract price to WR 1 5%, 20%, and 25%, indicative survey price, government standard, f o.b. Europe, fo.b.Tubarao. Unit dry metric ton unit (dmtu) stands for mt 1% Fe-unit. Bangkok To convert price in cents/dmtu to $/dmt SSF (dry ore), multiply by percent Fe Sorghum (US), no. 2 milo yellow, fo.b. Gulf ports content. For example, 28.88 cents/dmtu is $18.54 /dmt SSFTo convert to wet Wheat (ConGdion), no. I ,Western Red Spring (CWRS), in store, St. Lawrence, export rnt SSF (natural or wet ore), multiply by percent Fe content by (I minus percent price moisture content). 28.88 cents/dmtu is $17.34 /Wet mt SSE Iron ore in most Wheat (US), no. I, hard red winter, ordinary protein, export price delivered at the countries is traded in terms of dry mt, and shipped in wet mt. For 1989-96, Fe Gulf port for prompt or 30 days shipment content was 64.3% and moisture content 6.9% Wheat (US), no. 2, soft red winter export price delivered at the Gulf port for prompt Lead (LME), refined, 99.97% purity, settlement price or 30 days shipment Nickel (LME), cathodes, minimum 99.8% purity, official morning session, weekly aver- Other foods age bid/asked price Bononas (Centrol & South Amecoan), first-class quality tropical pack importer's price Silver (Hondy & Harmon), 99.9% grade refined, NewYork to jobber or processor, fo.b. US ports Steel products pnce index, 1990=100, Japanese), composite price index for eight Beef(Austrolian/New Zeolond), cow forequarters, frozen boneless, 85% chemical lean, selected steel products based on quotations fo.b. Japan excluding shipments to ci.f. US port (East Coast), ex-dock the United States and China, weighted by product shares of apparent combined Fishmeal (any origin), 64-65%, c&f Hamburg, nfs consumption (volume of deliveries) at Germany Japan and the Un/ted States. Lamb (New Zealond), frozen whole carcasses, wholesale price, Smithfield market, The eight products are as follows: rebar (concrete reinforcing bars), merch bar London (merchant bars), wire rod, section (H-shape), plate (medium), hot rolled Granges (Mediterranean exporters) navel, EEC indicative import price, c.i.f Paris coil/sheet, cold rolled coil/sheet, and galvanized iron sheet Shrimp (US), frozen, Gulf brown, sniell-on, headless, 26 to 30 count per pound, whole- Tin (LME), refined, 99.85% purity, settlement price sale price at NewYork Zinc (LME), special high grade, minimum 99.995% purity, weekly average bid/asked Sugar (EU), European Union negotiated import price for raw unpackaged sugar from price, official morning session; prior to April 1990, high grade, minimum 99.95% African, Caribbean and Pacific (ACP) under Lome Conventions c.i.f. European purity, settlement price ports Sugor (US), import price, nearest future, c.i.f NewYork 42 COMMODITY MARKETS AND THE DEVELOPING COUNTRIES t-0-: 5:-;0- -; -GLOBAL: - -: The World Bank is proud ~to announce the launch of Global Commodity Markets. Global: Commodity Markets, (ISSN 1020-72 1X) continues and expands the service,previously available t'o subscribers under the name Commodity Markets-and the Developing Countries, which will be disconitinued with this current issue, 1998/4. Special Note for Current Subscribers to Commodity Markets-and the Developing Countries As a special incentive to current subscribers to Commodity Markets and the Developing Countries, new sub- scribers to Global Commodity Markets. will be allowed to renew their subscription balance f 1999 (at only $123.75 per issue) and for their first full year at the special rate of $495 while receiving the full service. 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The opinions expressed are those of the authors and should not be attributed in any manner to the World Bank, to its Board of Executive Directors, or to the countries they represent (4f 4_ 44 _~~ r © 1998 The International Bank for Reconstruction ____-_ and Development/The World Bank 1818 H Street, NW, Washington, DC 20433, USA All rights reserved Manufactured in the United States of America Vol. 6, no. I _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ISSN 1020-0967 ISBN 0-8213-4416-1 __- ® Printed on recycled paper _ _