JANUARY 2000 Number 1 20306 GLOBAL COMMNODITY MARK:ETS A COMPREHENSIVE REVIEW AND PRICE FORECAST F T| THE WORLID BANK Coimmllodities Teanif LOU 3 Development Prospects Group JANUARY 2000 Number 1 GLOBAL COMMODITY MARKETS A COMPREHENSIVE REVIEW AND PRICE FORECAST THE WORLD BANK Commodities Team H Dev elopment Prospects Group Copyright () 2000 The International Bank for Reconstruction and Development/ The World Bank 1818 H Street N.W, Washington, D.C. 20433, USA All rights reserved. Manufactured in the United States of America. You may not copy, reproduce, publish, distribute, transmit, create derivative works, or in any way exploit any part of the contents of this publication without prior written permission from the Office of the Publisher at the address above. The contents of this publication may not be used to construct any kind of database. The World Bank does not guarantee the accuracy of the data and forecasts presented in this report, and accepts no responsibility whatsoever for any consequence of their use. ISSN 1020-721X ISBN 0-8213-4698-9 Contents Summary ......................... 5 Regional Price Indices.. ........................ 7 Special Features Commodities in the 20th Century ...................... . 8 Economic Outlook.. . ..................... 30 Ocean Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 COMMODITIES Energy Coal ............................ 34 Natural Gas ............................ 36 Petroleumn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Non-Energy Agriculture Beverages C ocoa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Coffee . .. . . . .. . . . .. . . .. . . . .. .. ... . .. .. . ... . .44 Tea ........................ 46 Fats, Oils, and Oilseeds Fats and Oils .................. ....... 48 Coconut Oil ................. 50 Palm Oil .................. 52 Sovbean Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Soybeans ................. 56 Grains Grains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 M aize . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 R ice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62 W heat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 ja n u a ry 2000 3 Contents (continued) Agriculture (continued) Other Food Bananas ......................... 66 Shrlmp. ..68 Sugar. . ........................ 70 Agricultural Raw Materials C'otton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... . . . 72 R ubber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 'tropical Timber ........... ..... .76 Fertilizers Nitrogen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78 Phosphates ....... ................ ....... . .. 80 Iotash .82 Metals and Minerals Aluminum .............................. .... 84 Copper ................................... . 86 Gold .................................... . 88 Iron Ore and Steel ............................ . 90 APPENDIX Commodity Price Data ............................ . 94 Commodity Prices and Price Projections in Current Dollars .... . 96 Confidence Intervals for Price Projections in Current Dollars ..... . . . 97 Commodity, Prices and Price Projections in Constant 1990 Dollars .... . 98 Confidence Intervals for Price Projections in Constant 1990 Dollars . . . . 99 \X'eighted Indices of Commodity Prices and Inflation . . . . . . . . . . . ]L00 TECHNICAL NOTES Description of Price Series .1......................... . .01 Definitions and Explanations .1........................ . 103' Acronyms and Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . .104 Thlls report was prepared by the Commodities Team of the World Bank's Development Prospects Group. The core team includes Donald Mitchell (Team Leader),John Baffes and Shane Streifel (Economists), Betty Dow (Senior Information Analyst),Jean-Charles Le Vallee (Consultant), and Katherine Rollins (Team Assistant). The report was prepared with the assistance of Margaret Moss of G.I.Global, Inc. Questions or comments should be e-mailed to gcm ,worldbank..org or visit us on the web at http://nwwworldbank.org/prospects/ 4 GLOBAL COMMODITY MARKETS SUMMARY Sum m ary additional 1.7 million barrels per day, with OPEC pro- ducers maintaining relatively high compliance to their tar- Commodity prices in 2000 are expected to geted cuts since then. Other commodity markets showed continue the recovery which began in 1999, due to a much smaller recovery in prices, but nearly all com- higher economic growth and reduced surpluses in modities appear to have reached lows during 1999 and some markets. Non-energy prices are projected are expected to recover in 2000 due to the improved to increase J.6%, led by metals with an increase economic outlook for both developing and industrial of 11.7% while agricultural prices are projected to countries. increase 4.0%. Petroleum prices will likely Metals and minerals prices fell 2.0% in 1999 com- remain high during the first part of the year, pared to 1998, but the index of prices reached a low- m following lastyear's remarkable recovery, but are March and then increased 22.0% during the remainder of anticipated to decline if OPEC increases production. Petroleum prices in 2000 are the year. The recovery of prices was sparked by produc- expected to be 10.7% above 1999 levels. tion cuts, but was also influenced by the rebound of de- mandin Asia. However, inventories of a number of metals remain high which has restrained overall pnrce increases. Most commodity markets continued to feel the ef- Stocks of some metals and minerals are expected to con- fects of the Asia crisis in 1999, wvith the index of non- tinue falling in 2000 as demand increases from improved energy prices falling an additional 10.9% following a de- global economic growth. Production will generally in- cline of 15.7/o in 1998. However, the prices of most crease less rapidly than demand, partly because high cost commodities also reached lows during the year and be- production which was taken off the mark-et in 1999 is not gan to recover, largely due to production cuts introduced expected to return unless prices rise significantly. by major commodity producers. Higher demand for Agricultural prices had the sharpest decline among some commodities, especially petroleum and metals, also major commodity groups in 1999, with the overall index contributed to the commodity price increases. The re- of agricultural prices down 13.6%. The index reached a covery in commodity prices was led by petroleum which low injuly and then increased about 5.0%. Unlike the case reached a low of $10.4/bbl in December 1998 and then with the metals or petroleum markets, the supply of agri- rose to a 9 year high of $25.1/bbl in December 1999. cultural commodities did not contract significantly in re- The recovery was sparked by an agreement among sponse to low prices and thus stocks of many commodi- OPEC producers in March to reduce production by an ties remained high. Demand was also slow to respond as Non-Energy Commodity Price Index (US $) (1990 = 100) 175 prices 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 Note: The constant price index is deflated by the MUV. Source: World Bank ja n u a ry 2000 5 SUMMARY the impact of lower prices was offset by lower incomes in Nevertheless, agricultural prices appear to have hit bottom many developing countries. For example, world grain and will likely increase over t]he next several years. production declined l.2% from the peak in 1997/98 while Last year, commodity prices were forecast to decline consumption grew only 0.8%. Consequently, grain stocks and this was generally borne out by the facts, except for pe- remain near theirrecenthighs andprices ofgrains fell 13.4% troleum prices which rose sharply from their lowest levels in 1999. Production of major fats and oils rose to record since the mid-1980s. Petroleum prices are expected to de- highs despite lower prices, and ending stocks continued to cline from recent highs when oil producers decide to raise rise causing prices to fall 21.0% for the year. Coffee, co- output. This is expected to occur in the first half of this year. coa and tea production continued to rise despite lower However, recent statements by OPEC members suggest that prices while consumption and imports fell due to the im- OPEC may extend quotas beyond March 2000, despite oil pact of lower incomes which more than offset the added prices above $25/bbl. It is unclear whether OPEC produc- consumption from lower prices. ers are targeting a higher price level, or simply waiting for Global sugar production and exports rose to record stocks to be sufficiently reduced before raising output. Sus- levels in 1999 while nominal prices fell to their lowest tained high prices would dampen demand and stimulate de- levels in 13 years. Part of the increase in world sugar velopment of competing supplies, making it more difficult production, and the consequent fall in prices, was due to for OPEC to raise production in the future. Nevertheless, it the emergence of Brazil as the dominant exporter. Since is expected OPEC will raise output and that prices will even- 1996/97, Brazil's sugar production has increased 29% tually settle back under $20/bbl. and exports have doubled to give Brazil a 27% export The recovery in non-energy commodity prices, 7.3% since market share. The increase was due to both policy changes the lows reached in July (chart), along, with the rebound in the in Brazil's domestic alcohol fuel program and to the cur- global economy has been faster than expected. The \X'orld rency devaluation which reduced domestic demand and Bank projects global economic growth in 2000 to be signifi- encouraged exports. Among other agricultural com- cantly faster than the previous forecast of 2.4%. The acceler- modities, natural rubber prices fell sharply due to cur- ated growth should support a more rapid recovery of com- rency devaluation bv major exporters and the collapse modityprices than previously e xpected, butnotrival therecov- of the International Natural Rubber Agreement and its erv that began in 1983 which was accompanied by 2.7% global buffer stock program. Agricultural prices are expected economic growth in 1983 and 4.3% growth in 1984. The an- to continue a gradual recovery, but stocks remain large ticipated recovery in commodity prices could be tempered if and pnrce increases will be moderate unless this year's the global economy fails to grow as fast as expected or if the production is affected by adverse growing conditions. agricultural sector generates a year of record production. Current and Previous Declines of Non-Energy Commodity Price Indices (Peak = 100) 105 15February 1980 - i,Janluary 1985- May 1996 - December 1999 June 18 80 -r------ ---- -- %-------- -% 65 l l l l l J I I I I I I I I I I I I I I I I I I I I I I I I I I I I l I I II 0 12 24 36 48 60 Source: World Bank Months from Peak 6 GLOBAL COMMODITY MARKETS REGIONAL PRICE INDICES Regional Price Indices East Asia and Pacific The index of non-energy commodity prices of 120 developing countries grew 3.4% this past quarter but is still J.3% lower than ayear ago. Latin 105 - - America and the East Asia and Pacific regions , ,/ orld fared relatively better while South Asia and Sub- 90 - Saharan Africa fared relatively worse. The largest - - price gains were in arabica coffee (22.7%) which benefited Latin American exporters and natural 75 -_______________j- --_- rubber (22.3%) which benefited exporters in the East Asia andPacific East Asia and Pacific region. While the largest 60 ... . I... . I.. , price declines were in cotton (-11.0%) and cocoa Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 (-9.8%) which affected Sub-Saharan African Latin America and Caribbean producers. 140 The East Asia and Pacific region's export price Latin America and Caribbean index increased 3.7%/o compared to the 2.7% decline 120 ------ --------------------- in the third quarter. The price increases of the major exports in the region came from natural rubber ----------- (22.3%), tin (7.5%), palm oil (4.1%), copper (3.5%), as weU as timber (logs 1.5%, sawn wood 1.7% and ply- World wood 6.5%). 80 -------------------- The Latin America and Caribbean region led all regions with the greatest increase (6.8%) in its export 60 I I price index of non-energy commodities, compared Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 to a -2.0% decline last quarter. The principal contribu- South Asia tor to the increase come from arabica coffee prices 120 while the prices of its other major non-energy export commodities also increased: soybean meal (12.0%), 105 ------------- sugar (8.3%), aluminum (4.0°.o) and copper (3.5%). South Asia had a 1.10% decline in its non-energy 90 ----- commodity price index - the same as last quarter. Cot- Wo d ton prices led the declines among important exports 75 --------'-,------- -_ of the region, with a decline of (-11.0%) followed by rice (-7.4%/o). Anotheriimportant export of theregion 60 , . I , I is tea, and prices were mixed with an increase of 7.4% Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 in Colombo, and a decline of -3.7%'o in the Calcutta Sub-Saharan Arica auction prices. 120 Among the developing country regions, the non- energy commodity export price index of the Sub- 105 ---------________________________ Saharan Africa region had the largest decline of the - ,"s quarter at -3.0%. Although most major non-energy Sub-Saharan Africa export commodity prices increased for the region, 90 ------------- sugar (8.3°/o), aluminum (4.0%), copper (3.5%) and robusta coffee (2.3/o), contributing to the overall de- 7 cline for the region is a loss of -9.8% in cocoa prices because of its importance to total exports. 60 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Note: The regional price indices use the US$ non-energy com- modity export basket of each region to compute the price index. 'I'his index is then compared with the index using global exports. ja n ua ry 2000 7 SPECIAL FEATURE Commodities in the 20th Cenitury The last century saw significant developments in vegetable oil. Aluminum became an important and commodity markets: dramatic increases in produc- xvidely used industrial comimodity, and captured mar- tion and consumption; falling prices relative to other kets from tin, copper, steel, and other materials in a goods; lower production costs from technical inno- varietv of sectors, e.g., construction, transportation, and vation; and a surge in global trade. The large post- packaging. It remained competitively priced and readily World War Two (WXWII) economic expansion led to available, unlike tin which steadily lost market share. rapid demand in growth for petroleum, metals and Xhile aluminum became an indispensable material, the other mineral resources and agricultural commodities. luster of gold diminished as its use as a currency and WXhlile global population increased from 1.7 billion in as a store of wealth declined. Crude oil and its prod- 1900 to 6.0 billion at the end of the century, the pro- ucts became important industrial, consumer, and mili- duction of commodities to feed, clothe, and support tary commodities, and its production increased from the rising population has in most cases exceeded the 0.4 to 65 million barrels per day (mb/d) from 1900 growth of population. Expanding production was to 1999 - and liquids from natural gas and synthetic possible because of improved technology, greater oil sands have taken total petroleum production above knowledge of the earth's resources, and more exten- 7-5 mb/d. sive and intensive agricultural production. Despite some expectations to the contrary, the The centurv saw new countries emerge as major world did not run out of commodities during the commodity producers and exporters, and "newer" century Food production increased faster than popu- commodities emerge as major products. Brazil, for lation and most of the wotld's consumers ended the example, became a major soybean producer and ex- century with a better diet than they began, due in large porter during the latter half of the century, producing part to the Green Revolution. Ilineral resource de- one-fifth of global production in 1999 from near zero velopment has greatlv expanded due to advances in in 1950. Oil palm was imported into Indonesia from technology and discovery of resources in new locales. \West Africa in 1948 and became the foundation of K4nown reserves of petroleum increased substantially, the Asian palm oil industry which is dominatcd by In- particularly in the Mliddle East, and technical advances donesia and Malaysia. Palm oil is now the most traded allowed the industry to replace these known reserves Real Non-Oil Commodity Prices, 1900-1999) 200 |15 0 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 100 l - 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 Note: Prices are in US Dollars, deflated by the MUV index, base weighted, using developing countries' export value shares For years 1900-86, figures are the Grill-Yalng Commodity Price Index, thereafter the World Bank's Commodity Price Index. nource: Grill, Enzo R., and Maw Cheng Yang. 1988. "Primary Commodity Prices, Manufactured Goods Proces, and the Terms of Trade of Developing Countries: What the Long Run Shows." The World Bank Economic Repiew, Vol. 2, No. 1: 1-47. 8 GLOBAL COMMODITY MARKETS COMMODITIES IN THE 20th CENTURY at a rate that exceeded their use. Metals production ning programs is the Common Agricultural Policy of became more efficient as technical innovation and the European Community which began in 1957 and improvements in productivity became widespread in has withstood attempts to encourage free trade by mining, smelting, and refining operations. Improved successive rounds of international agreements on tar- fabrication and new alloys allowed less metal to be iffs and trade. used without loss of strength. Commodity producers in developing and cen- Prices of commodities continued to fall through trally planned economies often received very different most of the century relative to the prices of other treatment than their counterparts in industrial coun- goods. And, many commodity prices ended the cen- tries. Instead of protection from cheap imports, they turv at their lowest levels in real terms. As the chart oftcn faced taxes on their exports, a convcnient way shows, the index of real commodity prices fell by about for governments to collect revenues. Production was two-thirds between 1900 and 1999. The persistent often government controlled and marketingwas done decline in commodity prices, led governments and by quasi-government organizations or marketing producers to take measures to trv to reverse the trend, boards. Supply control programs, such as those of the agri- During the century, the location of commodity cultural policies of the United States, were used to idle production shifted its concentration from industrial to cropland in an effort to reduce supplies and increase developing countries. For example, in 1900, the US prices. Coffee producers, led by Brazil, organized the accounted for 58% of global copper and 42% of glo- International Coffee Agreement in 1962 to restrict ex- bal petroleum production. By the end of the century, ports and boost prices. Other commodity producers, the US accounted for only 17% of global copper and such as the Organization of Petroleum Exporting 11% of petroleum production, while the shares of Countries (OPEC), joined together in an attempt to developing countries increased substantially. This shift raise prices through supply controls. Most attempts was supported by reduced transportation costs and im- to control prices have been unsuccessful and costly, as proved technology to both find and develop resources the higher prices encouraged production and led to in previously unknown areas. Developing countries end even greater surpluses. the century more dependent on commodities than do Buffer stocks were used by organizations of com- industrial countries, with primary commodities ac- modity producing countries in attempt to stabilize counted for 42 percent of merchandise exports of low- prices. Tin producers, through the International Tin and middle-income countries in 1997 compared to 19 Agreement, purchased for and sold from inventory percent for high income countries according to the World to maintain prices within a range. An International Bank's WorldDevelopmentIndicators. Cocoa Agreement was formed in 1972 to stabilize This Special Feature presents a brief and selec- world cocoa prices through buffer stocks, but was tive review of commodities during the twentieth cen- suspended in 1988. The International Natural Rubber tury. We look at agriculture, metals and minerals, pe- Organization (INRO) was formed to stabilize rubber troleum and other sources of energy. We examine the prices, but major producing countries withdrew from effects of technology, policy, transportation, and in- the Organization in 1999 following the Asia crisis of formation on commodities. Commodity prices reflect, 1997. In the end, most commodity agreements failed, as well as influence history, and the impact of wars buffer stocks re-entered the market, and prices were and depression are evident in many of the charts. The further destabilized. globalization of petroleum was especially important W hile some efforts were global, other producer during the twentieth century to both producing and groups directed their attention to supporting prices consuming countries. We look at commodity prices wvithin a country or region. These endeavors were relative to other prices and we note the dramatic encouraged by commodity producers who lobbied changes in certain commodities prices, such as alumi- for protection from lower priced imports. Such ef- num, which became an imnportant commodity during forts have been more sustainable than other mecha- the twentieth century. Such a broad topic as "Com- nisms to control world prices and many such pro- modities in the 20th Century" cannot be adequately grams are still in place, albeit at considerable expense covered in such a short feature, but we try to draw the to taxpayers and consumers. One of the longest run- broad lessons and trends from the last century. ja n ua ry 2000 9 SPECIAL FEATURE Agriculture centurv have boosted both the production and trade of commodities. Earlier methods of transportation included Agricultural ommodities have been traded for ceo- ,camels, and sailing vessels, but advances during the 19b'wcenturv made steamships less costly than sailing ships tunes, ab t the trade was mostli in i tdlgh valued commodi- lo tes such as spices or coffee. As the cost of transporta- erd tans ortucost s i or ad earlroacenow non declined and communication improved, it became possible to profitably trade more bulk, commodities compared to roads and together steamships and rail trans- , . , . ,, , . ' , . port shaped the way comimoditv markets operate. The such as gramns. This allowed countries to use their com- introduction of the steamship in about 1840 reduced the parative advantage to produce and export certain com- time to cross the Atlantic from 8 weeks to 1 week and modities wvhile importing others. Tropical commodities brought greater integration in comoditv markets Pnior such as cane sugar xvere imported into Europe and the bout greater interation in ty mart prio US and temperate commodities such as grains were ex- to the steamship, information on the demand and supply from countries such as Argentina, Russia and the conditions between the Americas and Europe moved ported . . . D'with the commodity. But, with the steamship, informa- Uniited States. W,"ith specialization came the incentive to tion could arrive before the actual deliverv of the com- improve technology and production practces in order m T i to~~~ inres prdcinadeprs modltv. XVi1th the expanded use of the steamshlips, com- to ri i crase produconiand rks h. b modities could also be transported quicker as well as A gricultural cmoiY markets have been cheaper. A second revolution which affected commod- strongly influenced by government pohecy for most of strongly~~~~~~~~~ inlecdb.oemn oc o oto ityT markets, was the installation of the transatlantic cable the century and these policies have had verv different i in 1866, enabling merchants to transmit information in- effects. Some encouraged higher production through pnce supports or protective tariffs. Others sought to ta yac nationalize agriculture and led to stagnation due to inad- rae to b ig and faserPshi ocure equate incentives. PoihcV interventions in agricultural com- during the 1950s, 60s and 70s, which caused the average modity markets began in the US shortly after WWI when size of cargo ships to increase bv 2.5% per year during modityT markets began in the US shortlv after XNXC&7T when the loss of war-time markets in Europe caused prices to this period. This race, party due to the Suez Canal cls- ingT in the 1950s, also helped spur other technological fall and great distress in US agrculture. The US eventu- . i t 9 heds other tnologica ally turned to tariff protection and this led to a round of Pr ovd mentsd fsc Pate ecializatof ibkl Thi spiraling trade restrictions by other countries. Tiis action e decline in transportation costs contributed to increased was soon followed bv direct government intervention commoditv trade and lower commodity prices as coun- in the US through commodity price supports. Western Europe embarked on the Commrton Agricultural Policy tries were able to exploit their comparative advantage. (CAP in195 wit th obectie o mantaiingfar Ocean freight rates for bulk cargo such as coal and grain i(nCo) icomparable to on-farm orkes.ntathg fim declined by three-quarters in 1999 constant dollar terms incomes comparable to non-farm workesAttheti over the last fifty years, from $40-60/ton to less than of the CAP, the EC) was a major net importer of mostD arcturCAl,th cmoies,a hjowr , t high an msta $10/ton on the US to Europe route. Ocean freight rates agncultural commnodities, however the high and stable .t . . < prices of the CAP quickly encouraged higher produc fluctuations can be seen as four major spikes during the tion and turned the EC into a commodity exporter. Japan's agricultural policies were aimed at maintaining a Freight Rates ($/ton) high level of self-sufficiencv and farm incomes compa- 100 rable to non-farm incomes. However, because of the Grain- US Gulf- small size of many Japanese farms, the policies led to a Contient verv high cost agriculture. Developing country policies were often aimed at food self-sufficiency and low food 50 - - - - - - prices while taxing export crops such as beverages. A Coal- Queensland- " A, R | f % , Continent Technology, Transportation and 25 ----8- -, I - - - - - Communications __v___.-____ 1950 1960 1970 1980 1990 2000 Improvements in technology throughout the 10 GLOBAL COMMODITY MARKETS COMMODITIES IN THE 20th CENTURY Korean warin the early-1950s, the Suez Canal crisis in the ports and shorter ocean voyages. mid-1950s, and the world oil crises in the mid- and late- Trading of commodities in organized exchanges 1970s. expanded rapidly early in the 20"h century. By the first The ratio of transportation costs to grains prices World War, organized exchanges were trading the ma- remained relatively constant during the second half of jor commodities in virtually all important trading cen- the century suggesting that the cost of ocean freight and ters of the world enabling not only information on the grain prices declined at about the same rate. More effi- supply and demand conditions to be available practi- cient port handling equipment and methods such as con- cally everywhere, but also offering hedging instruments taineriation contributed to the decline in shipping costs, to market participants. For example, in the period be- By 1980, about three-quarters of US linear tonnage to tween the first and second WX`orld Wars there were at continental Europe moved via container. Between 1982 least 10 futures exchanges trading cotton contracts. and 1995, container use in developing country ports grew Improvements in tcchnology have also takcn place by 15.5°'o per annum, increasing their share of world- on the production side. A dramatic example of this wide container traffic from 24 to 50%. Other improve- was the development and spread of hybrid com in the ments which helped reduce the cost of marititne ship- United States. I lybrid seeds, formed by crossing four ping included: an open registry shipping; the weakening inbred lines, became commercially available during the of shipping cartels and increased competition; improved 1920s and were widely adopted in the major com grow- propulsion methods, electronic equipment for cargo, ma- ing areas of the US by 1940. In the state of Iowa (US), chinery control, and navigation; better paint coating; lower hybrid seeds accounted for 97% of the area planted to maintenance costs and a lower manning/cargo ratios; in- corn by 1941 and yields averaged 51 bushels per acre creased utilization of ships, a reduction of time idle in (3.20 tons per hectare) compared to 31 bushels per acre U.S. Corn Yields (ton/ha) 12 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 Corn Prices ($/ton) 700 US Farm 525 r----l---- --------------- A------------------------------------- 3 5 0 ---- ----- ----- ----- 175 - - - - - - - - - - - - - - - - - - - - - -- - --_ 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 ja n U a ry 2000 11 SPECIAL FEATURE (1.95 tons per hectare) just 10 years earlier. The devel- Mexico and the International Rice Research Institute opment and adoption of hybrid corn marked a turning (IRRI) in the Philippines, acLapted to conditions and cli- point in US corn vields from which corn yields grew by mates in developing countries and released during the an average of 2.7/o per annum from 1940 to 1998 and 1960s. This became know as the "Green Revolution" exports increased ten fold. The continuation of yield and it included improved genetic potential of seeds, growth following the initial gains from hybrid seeds increased fertilizer use and expanded irrigation. The relied on improved production practices, higher fertil- important characteristics of the new varieties wvere short izer and chemical use, and continued improvements in and sturdy stems, high tilling ability, responsiveness to genotypes. Hybrid corn xvas not the only technological fertilizer and early maturity. The short and sturdy stems advance, as total factor productivity in US agriculture allowed plants to carry the increased grain resulting from increased at 2.0% per year from 1948 to 1994 accord- heavy fertilizer applications wvithout lodging. Early ma- ing to a recent research report. The rate of growth turity allowed two and sometimes three crops to be increased during this period, from about 1.5% per year grown each year The new varieties allowed rields to prior to 1980 to more than 3.0% after 1980. double in many cases and greatly contributed to the Yield improvements in rice and wheat attained in improved diets of milLions of people in developing the industrial countries during the 1940s and 1950s were countries. WXheat yield increases, for example, achieved replicated in developing countries during the 1960s. The beginning in the 1940s in the US were also achieved in high-yielding varieties of rice and wheat used in devel- India from the mid-1960s. Today, there is little differ- oping countries were developed at the International ence in wheat yields between India and the United States Maize and WXheat Improvement Center (CILMlYT) in (chart). Wheat Yields (tons/ha) 2v 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 Wheat Prices ($/ton) 1000 us Farm 750~~~~~~~~~~~~~~~~~~~~V Ini 0 ........._.......i _ _ __ __ / ___ _ __ __i_ _i_ _i__ iiii_ __ ___i_iiiiiiiiip jimiiiii_ I I_ 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 12 GLOBA]L COMMODITY MARKETS COMMODITIES IN THE 20th CENTURY Agricultural Policies policy instruments: (z) a price support program; (ih) a production adjustment program; and (iii) a loan and The watershed events leading to major interven- storage program. Even though the AAA was eventu- tions in commodity markets came shortly after WMI. ally declared unconstitutional because of the process- The run-up in food commodity prices during the war ing taxes used to finance production controls, its key as a result of the disruption in European agriculture elements reappeared in the Soil Conservation and brought a substantial production response from North Domestic Allotment Act of 1938. That legislation is American agriculture to meet the expanded export still the basis for much of US agricultral policy. opportunities. As production resumed in Europe ag- From the outset it was difficult to separate the ricultural commodity prices fell sharply in the face of issues of price stabilization and price enhancement. the expanded output of the major exporters compet- US farmers pushed for a concept of parity prices that ing in a shrinking market for imports. focused on maintaining the highly favorable farm-non- The second event that occurred at this time was farm price ratios of 1910-14, and support prices were the Russian Revolution which put in place an ideology set as some function of this ratio until the 1960s. In that rejected private property and market prices. Over reality the desired price ratios were never achieved via time complete state planning and control was installed government programs during the 1930s and were only over commodity production, distribution, prices, and realized as a result of the wartime boom of WWII. external trade. After WWII this system was adopted The production adjustment program of the origi- by China, and imposed on the countries of central nalA-AA was declared illegal by the US Supreme Court, and eastern Europe as they came under Soviet domi- and the production adjustment efforts immediately nation. switched to land use control via soil conservation. This meant that in order for farmers to qualify for com- United States modity price support they had to limit their planting of soil-depleting crops. Thus, land use controls and The loss of wartime markets in Europe created land retirement became the method of production great distress in US agriculture in the 1920s and there control for the supported commodities. This system was rising political pressure for direct government in- persisted until 1996 when the US congress enacted the tervention. The McNary-Haugen bill to establish a Freedom to Farm Act. domestic allotment program to bolster US prices via Prior to 1996 the price stabilization/improve- a two-price system passed the US congress twice in ment was to be achieved largely via the loan and stor- the 1920s and was vetoed by the President. However, age program that removed surplus supplies from the in 1929 the Federal Farm Board was established which market. A system of nonrecourse loans was initiated attempted to stabilize prices of agricultural commodi- whereby producers could get a government loan on ties by the purchase and storage of excess supplies. their crop at the support level and repay the loan by This effort failed due to inadequate financing in the delivering the crop to the government. Thus the gov- face of the world economic collapse of the Great ernment became the buyer of last resort. Of course, Depression. Also, in 1929 President Hoover asked it was often impossible to export commodities at the for tariff protection for US agriculture and congress supported domestic price so a system of export sub- passed the Smoot-Hawley tariff sharply raising US sidies and/or direct sales from government stocks was tariffs, which he signed into law. These new trade instituted. This system, buttressed by a series of high barriers in the face of the depression led to a spiraling tariffs and import quotas attempted to isolate the US round of trade restrictions around the world and tar- agricultural commodity markets from world prices and iffs and quotas on agricultural imports. instability. One of the first priorities of the Roosevelt Ad- The original AAA focused on stabilizing the prices ministration which came to office in 1933, was to re- of the basic commodities-wheat, corn, cotton, and store the economic health of US agriculture. The ef- rice. In 1934, the Sugar Act of 1934 set up a stabiliza- fort came in the form of the Agricultural Adjustment tion program for domestic sugar producers using im- Act (AAA), which brought direct government inter- port quotas to replace the tariffs that had protected vention in commodity pricing. It established three the industry over the previous centuryv The import ja n u a ry 2000 13 SPECIAL FEATURE quotas were set to produce a stable desired domestic The rising commodity prices quickly were trans- price. Foreign exporters were granted preferential mitted into rising US food prices and rising inflation. access for their quota sugar into the US market. Price controls were instituted for meat and poultryv During WN"WII domestic full employment and and in 1974 soybean exports from the US were em- strong foreign demand again brought booming com- bargoed to control rising prices. modity markets. Domestic price support levels were Higher prices and rising exports meant that the escalated as demand grewv, but the memories of the US government was no longer involved in supporting 1920s remained and legislation was passed that guar- domestic commodity prices. Since world prices were anteed high levels of price supports for the major ag- so strong, there was a tendency for the US congress to ricultural commodities for several years after the war. push up target prices to keep up with inflation in pro- Efforts in the late 1940s to institute a more flexible ducer costs, since there was no apparent government system were thwarted by the opposition of agricul- program cost in doing so. The 1981 farm bill was the tural producers. last to escalate price guarantees. In 1982 world agri- Major problems of surpluses were averted by cultural commodity prices collapsed as a result of a the Korean W"ar boom, but by the mid 1950s the dif- world-wide recession, economic difficulties in devel- ficulties of high level price stabilization became fully oping countries, and the rising value of the UTS dollar. apparent. Stocks of supported commodities began Suddenly the US xvas back into the problem of price- to accumulate in government storage and program support loan levels that were so high that huge accu- costs began to escalate. Despite the inauguration of mulations of surplus conmmodities was occurring. large-scale land retirement programs the surplus stocks Program costs began to spiral again as they had twenty rose, and a major program using surplus food com- years earlier, and the government embarked on an- modities as foreign assistance for developing coun- other large land retirement program. tries (PL 480) was inaugurated in 1954. At one point Farm program revisions in 1985 and 1990 were in the early 1960s the surplus stocks owned by the US aimed largely at controlling the costs of support pro- government became so large that moth-balled WWVII grams via limiting price support levels and avoiding Liberty ships were used to store surplus grain. surplus stock accumulations. By this point even the The costs of support programs rose xvith rising most avid believer in price stabilization recognized that surpluses. By the mid 1960s it was obvious that US the US domestic programs could not stabilize world attempts to stabilize prices via storage programs was prices and that attempts to do so largely resulted in not succeeding and a shift began to lower price sup- loss of world market share in export markets. ports supplemented by direct government payments By the mid 1990s world agricultural commodity to farmers. The shift to target prices and deficiency prices were booming again as a result of exuberant payments to producers of basic commodities when growth in developing countries which created rising prices fell below the target price was completed in the demand for better diets. By 1995 world prices were 1973 farm bill. However, the Sugar Act persisted until so high that no deficiency payments were to be made 1974 when rising inflation and global shortages sent to US producers of supported crops. T hat brought world sugar prices skyrocketing above domestic prices forth the 1996 Freedom to Farm Act. It abandoned so that the old quota system no longer maintained stable the half century old production control program of domestic prices. land retirement and the target price/deficiency pav- The surplus grain stocks disappeared as the So- ment system in favor of fixed declining direct pay- viet Union made a surprise entry into world markets ments based on past production history of supported in 1973 and made huge purchases of US grains. crops. Price support levels were set low enough to Coupled with a downturn in world grain production avoid government acquisitions of surplus stocks. It in 1973, a bad monsoon in India, and a sharp rise in was asserted by the sponsors of the new approach world crude oil prices the Russian grain purchases set that a new era had arrived. However, the new era was off an explosion in world agricultural commodity to be short lived. In mid 1997 the booming econo- prices. Concerns about commodity surpluses and loxv mies of Asia collapsed ancl the demand for agricul- prices were quickly replaced by near panic over sky- tural commodities fell sharply Agricultural commod- rocketing prices and short supplies. ity prices plummeted and tlhe US Congress provided 14 GLOBAL COMMODITY MARKETS COMMODITIES IN THE 20th CENTURY $8 billion in emergency assistance to agricultural com- levies, it promised almost perfect internal price stabil- modity producers in 1998. This was followed by an ity, and it initially offered little threat to major world additional $18 billion in 1999. It remains to be seen exporters. However, the CAP with its high and stable what direction US commodity support programs will prices produced a substantial incentive to increase ag- take in the new century as they are reviewed in 2001. ricultural output. In a period of little more than a de- cade the EC went from being major importer of most Western Europe commodities to being a major exporter of grains, meats, poultry products, sugar, and dairy products via Countries in Western Europe had substantially the use of export subsidies. In the meantime, except different agricultural structures prior to WWTI and their for commodities covered by bilateral trade agreements policies reflected those differences. France was a rela- the EC imports of competing products fell as they tively efficient surplus producer with an interest in ex- were unable to compete with products shielded by port markets. The UK pursued a liberal trade policy the variable levy. In the early 1970s, when the entry of with a heavy dependence on imports. Germany had a the Soviet Union into markets as buyers drove com- protected agriculture with large agricultural estates in modity prices sharply higher, the EC applied export the East and small less efficient peasant farms in the taxes to maintain internal price stability for inputs to West. The Dutch had an efficient export-oriented ag- their meat, poultry, and milk producers. riculture. As economic growth and prosperity swept West- However, virtually all of the countries suffered ern Europe, the attempts to maintain income parity from a common problem of food shortages and hun- for farm producers meant rising internal commoditv ger during WWII as the war disrupted agricultural pro- prices, greater gaps between internal and external duction, distribution, and trade. At the end of the prices, and sharply higher program costs for commod- war western European countries were still heavily ag- ity purchases, storage, and export subsidies. The EC ricultural and restoring agricultural prosperity was given officials became enthused with the concept of inter- high prioritv. national commoditv agreements to stabilize world The Treaty of Rome which launched the Euro- commodity prices, especially to remove the low prices pean Common Market of six countries in 1957 had that were causing the CAP to become so expensive. the establishment of a Common Agricultural Policy This became the main negotiating objective for the (CAP) as one of its principal objectives. It called for a EC in the Tokyo Round of GATT negotiations. policy that aimed at maintaining farm incomes com- In the 1980s the deteriorating world market situ- parable to non-farm workers, a common internal price, ation for agricultural commodities brought the same a common external tariff, and common financing of difficulties to the CAP that the US policies had suf- the CAP. The policy mechanisms to achieve these goals fered in the 1960s and again in the 1980s. Surplus were put into place in the early 1960's. They included stocks rose, export subsidy costs skyrocketed, and farm a variable levy to insure that imports would not un- incomes still lagged. In the mid 1980s milk marketing dermine domestic price levels, export subsidies to en- quotas for individual producers were instituted to re- able exports to move into foreign markets, export duce the flood of surplus milk production. Finally, taxes to ensure that in times of high world prices that the EU turned to land set aside to limit program costs exports would not create price pressures in the do- and slow stock accumulation. In 1992, a major re- mestic markets, and government intervention to main- form of the CAP was undertaken. It moved to lower tain internal prices via purchase and storage programs. prices for most supported commodities, especially The initial internal price levels set in the early 1960s grains and beef, and instituted a system of direct com- were quite high compared to world markets to main- pensatory pavments to producers to offset the lower tain incomes on the poorly structured farms in West- market prices. ern Germany and Italy. The Uruguay Round Agreement on agriculture At the time the CAP was formulated, the FC led to the conversion of all quotas and variable levies was a major net importer of most agricultural com- to fixed tariffs with tariff quotas to allow minimum modities. The original CAP was designed for import- imports. However, the EU set its fixed tariffs very ing countnes because it could be financed by import high and then instituted a system of variable tariffs january 2000 15 SPECIAL FEATURE below them to maintain stable internal prices. The hidden trade barriers under the guise of sanitary and reduced internal price levels from the 1992 reforms phytosanitary precautions. However, for several key allowed the EU to export without export subsidies agricultural commodities not widely produced in Ja- during periods of high world commodity prices, and pan, trade restrictions did not apply. The two major to meet their international obligations for lower spend- commodities were soybeans and course grains for live- ing on export subsidies even during periods of low stock and poultry feed to meet the booming demand world prices. for domestic livestock production. In 1998, the EU again re-appraised the CAP as The price spikes in comnmodity prices in the early they prepared to expand EU membership to several 1970s and the 1974 export embargo on soybeans by countries in Central Europe. The EU commission the US government sent slhock waves through Japa- proposed further modest reductions in support lev- nese society and politics. It reinforced their intense els, but these were set aside by the Heads of State for desire for self-sufficiency in basic foodstuffs, and it even more modest reductions. Thus, the EU entered fueled increasedJapanese interest in international agree- the new century with its policies still aiming at internal ments to stabilize agricultural commodity prices and price stability and internal prices disconnected from guarantee reliable supplies of imports. world prices. It should be noted that South Korea and Taiwan which had land reform and new policies after WYWTIl Japan adopted policies similar to those of the Japanese, with a heavy emphasis on high domestic protection and Prior to WWa7II, Japan depended on domestic extensive use of state trading. production and imports from Korea, Taiwan, and China. During WW"AVII, the Japanese suffered severe The Centrally Plannead Economies food shortages as external supplies were cut off. Af- ter WW/XIII, Japanese agriculture was substantially re- The Soviet Union nationalized its agricultural pro- structured, new agricultural laws were written, and the duction, marketing and processing, and internal distri- stage was set for the policies of the second half of the bution svstem in the 1930s. After WNWII, as they gained century. control over Central Europe the Soviets imposed the The new policies had several objectives. One same systems of production and distribution on most was to maintain a high level of self-sufficiency in the countries with the exception of Poland, where peas- production of basic food grain. A second was to ant farmers refused to allow the collectivization of maintain farmer incomes at levels comparable to non- their land. Even in Poland., however, the processing farm workers through adequate domestic prices. The and distribution system was nationalized, and all policies included building a system of independent producer's prices were set by the state. family farms supported by an extensive system of The centrally planned systems had two goals: low farmer cooperatives. However, the purchase, domestic cost food for urban consumers and self-sufficiency or distribution, and imports of the basic commodities as near self-sufficiency as possible. \X"here national self- was given to various state trading agencies. The gov- sufficiency was not achievable, trade was to be done ernment established a monopoly over the imports and with other centrally planned economies if possible. distribution of rice, wheat, barley, beef, and dairy prod- That trade was carried out with artificially determined ucts. Internal price levels were protected by a series of prices, often involving barter such as Cuban sugar for import quotas. Soviet oil. Internal prices were set at levels high enough to These agricultural policies were less than success- provide reasonable incomes for the very small family ful. The inefficient production systems could not pro- farms established by the land reform. As the non- duce adequate supplies of meat, milk, and poultry to farm prosperity flourished the domestic price levels supply consumer demand at the artificially low prices. had to be elevated well above world prices. The high Therefore, supplies were rationed, generally by long domestic prices were maintained by state trading, a lines and shortages, and in the early 1970s the Soviet web of import quotas on major commodities not Union and some Central European countries entered controlled by state trading, high tariffs, and numerous the world grain and meat markets to offset inadequate 16 GLOBAL COMMODITY MARKETS COMMODITIES IN THE 20th CENTURY domcstic supplies of feed-grains and protein feeds. ducers in developing countries often received low During the 1970s and 1980s, the large and er- prices even in the best of times, and their incentive to ratic Soviet imports were clearly destabilizing to the produce was reduced. Food importing developing international commodity markets. In 1975 the United countries often desired to maintain low internal food States signed an agreement with the Soviet Union prices to satisfy urban consumers, and they did this bv whereby the Soviets agreed to import a minimum import and resale policies that kept prices down. This amount (6 million tons) of wheat and corn each year had the effect of reducing incentives for domestic pro- and agreed not to buy above a maximum amount ducers despite the fact that in many developing coun- xvithout US government permission. Domestic poli- tries agriculture was the largest source of income and tics in the US prevented any upper limits ever being employment. enforced on Soviet purchases from the US. In early In addition to the widespread use of state trad- 1980, in response to the Soviet invasion of Afghani- ing many developing countries maintained substantial stan, the US embargoed the delivery of grain to the tariffs on imports of agricultural commodities as a Soviet Union which destabilized world grain markets. method of raising revenue. In the late 1970s, other socialist countries in Cen- All in all, both importing and exporting devel- tral Europe also entered world markets to offset in- oping countries wanted stable commodity prices. Ex- adequate domestic supplies of grains and oilseeds nec- porters wanted high stable prices to maintain foreign essary to bolster meat and poultry production. exchange earnings for their export commodities, and In the late 1970s, China broke out of its total food importers wanted low stable import prices to reliance on domestic production and entered world minimize foreign exchange costs and to maintain low markets to supplement their domestic supply of grains food prices. Developing countries do not have either and oilsecds. In the 1980s, China became an intermit- the policies or the resources to unilaterally stabilize the tent exported of corn while importing wheat. Of prices of export commodities, and during times of course all imports and exports by China were done high world commodity prices importing countries through state trading entities. could not afford to subsidize domestic consumers and maintain stable domestic prices. These facts led devel- Developing Countries oping countries to seek collective international action to stabilize commodity prices. The stake of developing countries in world com- Most developing countries can not afford an ex- modity price stabilization was even greater than for pensive domestic price policy to stabilize internal most developed countries. A number of developing prices. One exception is India, which after the great countries are the major producers and exporters of food crisis of the 1960s organized the Food Corpo- agricultural products, including coffee, cocoa, tea, and ration of India to purchase, store and release foodgrains sugar. These countries were frustrated by the extreme to the domestic markets to stabilized both prices re- fluctuations in the prices of their commodity exports, ceived bv producers and consumer prices for basic especiallv by the periods of low prices that cut their foodgrains. This effort was buttressed by import quo- export earnings and created major macro-economic tas and state controls over foodgrain exports. De- problems. spite this significant and sometimes expensive policy, There also is a group of developing countries India was one of the developing countries leading the that have become increasingly dependant on imported push to stabilize international markets. grain and oilseed products needed to underpin rising consumption of meat and poultry products. They were extremelv concerned by the sharp rise in prices The section on agriculturalpolicies is based on a backgroutnd and import costs in the 1970s. paper prepared by Projfessor Dale E. Hathaivaq, Director of Miany developing countries used state trading en- the lNational Center Jor Food and Agriculture Policy. Th)e tities to control both imports and exports. Parastatals paper is entitled, "Government Intervention and ComNmodit;' often were used to process and market export crops. Price Stabili,ation: An Overview of the 20th Century." Many countries applied taxes on commodity exports. As a result of these various devices commodity pro- ja n ua ry 2000 17 SPECIAL FEATURE Metals with intervention, supply/clemand forces played a ma- jor role in determining price levels for much of the Metals and minerals prices have generally declined century. The lengthy Intertiational Tin Agreement was during the 20"l century, wvith most ending the period at the most successful intemational commodity agreement or near their lows of the past 100 years. Prices have (ICA) until financial difficulties and rising production in been volatile and most markets have been highly cyci- Brazil and China led to its dIramatic collapse in 1985- cal. There have been sharp price peaks due to a variety effectively ending this approach to international com- of supply/demand factors, but these were relatively modity policy The US government has maintained a brief. Longer periods of troughs were far more typi- stockpile of important industrial metals as a means of cal, although this varies bv comodity The largest spikes preventing war-related supply interruptions for impor- since \XXX"IT were in gold and silver prices in 1980, but tant military commodities. Large purchases were made the other commodities experienced greater frequency in the 1950s, with inventories of some commodities of large fluctuations over the century. exceeding annual xvorld production, e.g., tin and mo- In the first part of the century, the US was a large lybdenum. These inventorics were reduced significantly player in many industries, and US companies had large during the 1960s (later for tin). foreign holdings. Production grew slowly in the pre- The century ended for many, but not all, indus- XXAXVII period, but then increased substantially with the tries experiencing low prices, high stocks, surplus ca- large post-war expansion of global economic activity pacity, and weak demand in the wake of financial crises. The most rapid rate of growth was in aluminum pro- A wave of privatizations and mergers has gripped some duction because of its price competitiveness with other industries which is expected to lead to rationalization metals and its ready availability. Aluminum made sig- of assets, but also contribute to improved efficiency, nificant inroads into the construction, transportation and lower costs, and increased profitability and investment. container industries. The slowest rate of growth was in The steel industry continues to face over capacity, which tin, partlv because controlled high prices under interna- has led to renewed trade tensions among several pro- tional tin agreements dampened demand and led to loss ducing countries and the imposition of anti-dumping of markets to other metals, notably aluminum. End- actions. use demand of metals has continued to shift and sub- stitution opportunities increased, both with other met- Copper als and non-metals, such as plastics and ceramics. Several technological advances in production, e.g., Copper prices have been declining in recent de- ore leaching, and other improvements in productivity cades, but price movements have been highly volatile have led to significant reductions in costs for all metals and cyclical. Government interventions have at times and minerals. Lowver costs suggest a loosening of re- had significant impacts on prices, and producer groups source constraints, and new entrants have appeared and have also attempted to intervene by adjusting produc- supplies have steadily increased. Nationalization of for- tion and exports. The US government has taken action eign assets in Latin America and Africa in the 1960s and during periods of war and national emergencies to con- 1970s led to greater state ownership but also financial trol prices, impose quotas and tariffs, and buy and sell difficulties, especially the lack of sufficient capital to for the national stockpile. Despite these intrusions, undertake new development. Not all takeovers have market supply and demand fundamentals have been proven unsuccessful, e.g., the continued success of the principal determinants of prices over time. Codelco in Chile. The tendency for nationalization has Production grew slowlvy until \XNXVI, and then grew declined and has generally been reversed during the last strongly during the large post-war industnral expansion. part of the century, with privatization of some state During the first half of the century, copper production companies. was dominated by a few UIS companies which also Various efforts by producer groups and govern- owned operations in foreign countries, but the level of ments to control prices have met xvith limited success. concentration has fallen significantly with new entrants. Most actions have either ended or have been reduced, Nationalization of producing assets in Africa and Latin and prices for the last quarter century have generally America in the 1960s and early 1970s increased the vol- been determined in more competitive markets. Even ume of production by state companies. In Africa, there 18 GLOBAL COMMODITY MARKETS COMMODITIES IN THE 20th CENTURY have been severe financial problems and assets are be- Today they still consume half, but Asia has steadily ing re-privatized, but Chile's Coldelco continues to thrive. emerged as a major consuming region, absorbing more Nevert heless, the level of govemment ownership has than one third of refined copper production. The con- fallen, in part due to privatization in eastem and central struction and electrical sectors are the largest markets Europe. for copper, and increasing copper intensity in these sec- There have been several technological advances in tors has led to strong growth in the 1990s, although the the mining of copper, beginning with open pit mining industry is facing increased competition from fiber op- techniques in the US in 1906. About the same time the tics and aluminum. froth flotation process improved recovery rates sub- Copperprices in 1999 were near their lowest point stantially. Other innovations have improved productiv- of the century, despite strong demand, in part because ity, reduced costs, and have allowed lower grade ore to of declining costs and abundant supplies. Heading into be mined profitably. 2000 and beyond, prices are poised to launch another There have also been significant technological ad- cyclical rally as the global economy continues to recover vances in smelting and refining operations. One of the from recent financial crises. This will increase profit- most important advances has been the development of ability, stimulate new investment, bring forth new sup- solvent extraction/electrowinning (SXEW) process in plies, and likely prices will endure only a brief spike, as ore leaching operations. More recently the use of bac- in the past. terial action has been developed to accelerate leaching when copper sulfides are present. All of which have Aluminum continued to lower the costs of production over time. At the turn of the century, the US and Europe Aluminum prices have declined substantiallv this consumed virtually all of the world's copper output. century, with a slight downward trend since WNWII. Dur- Real Copper Price ($/mt), 1900-1999 10000 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 World Copper Production (000 tons) 14000 F]~te Elus-_ 10500 _--_- _---------------------------------------------- 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 ja nu ary 2000 19 SPECIAL FEATURE ing periods of war and other times of intervention, US North America produced over half the world's (and other) prices were fixed by governments. For the aluminum up until the late 1960s, but that share has fallen last quarter century prices have been market determined towards one-quarter because of a decline in the US by changes in supply and demand. (Canadian production has continued to grow strongly). Aluminum production began in the late 19"' cen- Large new capacity has been developed in Australia, tury, and growth in the early part of this century was Brazil, China, Norway, Russia, South Africa, and the small in volume terms. Shortages during WWI caused Middle East. prices to isc substantially as aluminum demand increased Because a key input for aluminum smelting is elec- for aviation and munitions manufactures. US controls tricitv (which in turn is produced from other forms of on prices and allocations were first introduced in 1918. energy), the aluminum industry w,vas particularly xTulner- Production grew significantly leading up to, and well able to the energy price shocks of the 1970s and 1980s. into \VWII, with most of the growth in US/Canada, Japan let its industry fall to a tiny fraction of its former Germany, and Japan. US/Canadian production rose capacity while Europe has chosen to support its indus- substantially for the war effort, increasing 17-fold be- tries. tween 1935 and 1943. In the early 1980s, the industry suffered from over Production grew rapidly in the post-war expan- capacity, but some of the excess was closed perma- sion as the industry benefited from its price competi- nently and a strong recovery in demand led to high prices tiveness With copper and other non-ferrous metals, in the late 1980s. In the 1990s, new capacity and a flood making significant inroads into construction and trans- of material from the collapsing FSU led to declining portation. In the late 1950s the industry began produc- prices once again. The industry ended the century with ing aluminum cans, and today the container sector is the large-scale mergers, and anticipates rising demand into second largest market for aluminum behind transport. the foreseeable future, boith from global economic Real Aluminum Price ($/mt), 1900-1999 20000 15000 ---- ----------------------------------------------------------- 10000 ------ --------------- 5 0 0 0 - - - - - - - - - - - _- _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _________ 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 World Aluminum Production (000 tons) 24000 . Other LI F CPEs El us 12000 ------------------------------------------- 6 0 0 0 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2(0 GLOBAL COMMODITY MARKETS COMMODITIES IN THE 20th CENTURY growth and the capture of markets from other metal prices in the 1980s. Today, Asia accounts for two-thirds producers. of world tin production, with Latin America produc- ing nearly one-fourth. Tin International agreements in the tin market date back to the 1920s, with export controls and buffer stocks Contrary to other minerals, tin prices have been used to control price fluctuations. In the post-war pe- rising throughout much of the past century, mainly be- riod, six International Tin Agreements (ITA) have op- cause of commodity agreements. However this ended erated, beginning in 1956. The aim was to control price in 1985 and prices collapsed, reaching their lowest point fluctuations within a specified price floor and ceiling of the century in 1999. with purchases and sales from the ITA's buffer stock, Tin is one of the earliest metals known to man, using export controls if necessary. However, the buffer and one of the few minerals for which the bulk of the stock was not sufficiently large to defend the price ceil- world's supply is produced in developing countries. ing and prices often rose. In the early 1980s, the slump Four producers - Bolivia, Indonesia, Malaysia and Thai- in global demand necessitated accelerated buying for land - dominated production during most of the cen- the buffer stockpile, beyond that which the stock man- tury. Bolivia is a high-cost producer and was greatly ager was authorized to absorb. Financial difficulties, affected by the price collapse, but the state company compounded by depreciation of the dollar, led to a was already in financial difficulties prior to the fall in collapse of the sixth agreement in 1985. prices. In the 1980s, low-cost production in Brazil grew Consumption growth of tin has been significantly rapidly, as did output and exports from China, both of affected by high prices which resulted in a loss of mar- which contributed to the market surplus and decline in kets to substitutes, notably aluminum, but also to plas- tics, glass and alternative means of food preservation Real Tin Price (¢/kg), 1900-1999 4000 O ... ... 11 1111 . . I I.........I... ... - I ......... I... I I l I I I I I I I I I I I I II I I I I I I I I I I I I I i I I.II,I,I,I,I,I,I,I,, 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 World Tin Mine Production (000 tons) 260 |* Indo/Mal/Thai aLatin A. :]Other . 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 ja n u a ry 2000 21 SPECIAL FEATURE such as freezing. It has also suffered from technological 1900 setting the value of the dollar to $20.67/toz, com- change in the use of tin in other markets, and the col- mitting the US to maintain fixed exchange rates with lapse of the FSU greatly reduced irnport demand for other countries then on the gold standard. In 1934, the tin. With low prices demand has grown and the indus- gold content of the dollar was reduced, increasing the try will endeavor to at least retain market share. price of gold to $35/toz. In 1968, a two-tiered market Mlany state owned enterprises have undergone pain- for gold was established: a fixed price for monetary ful adjustment, and there have been significant efforts transactions and a free market for private transactions. to reduce costs and improve efficienicy. Nevertheless, In 1971 the US suspended d[ollar convertibility to gold, high-cost capacity has been forced to close, and new which effectively removed gold's pivotal role in the in- entrants may not appear unless prices rise. temational monetary system. The official price was raised to $38/toz in 1972, and to $42.22/toz in 1973, before Gold the two-tiered pricing system was terminated in No- vember 1973. At end-1974, private US citizens could Gold has long had a dual role as an internationally again hold gold. traded commodity and an accepted store of wealth. It Since the early 1970s a global market for gold as is also unique among commodities in that much of the an asset in its own right has developed, along with a world's production goes into inventory, and thus most large portfolio of derivative instruments. In the 1970s, of the gold produced is still in circulation in one form amid declining production and economic and political or other. concerns, hoarding and speculation propelled gold to The official nominal price of gold was steady up an all-time high of $850/toz in January 1980. Gold until the early 1970s, with only one significant jump in then declined to under $300/toz in 1985 and, while the 1930s. The US passed the Gold Standard Act of volatile since then, has been under $300/toz the past Real Gold Price ($/toz), 1900-1999 1200 900A 600 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 World Gold Mine Production (tons) 2600 * USSR [ Other 1950 E South Addca - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - ---- - - - - - - 650; 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 22 GLOBA:L COMMODITY MARKETS COMMODITIES IN THE 20th CENTURY two years. OPEC continues to constrain output to target a price South Africa is the world' top producer, account- level well above the costs of production. The century ing for two-thirds of world's production in 1970, but ended with prices swinging widely, a reflection of the output volume has steadily declined, contributing to the turbulence that has characterized the post- 1973 period. tightening of the market in the 1970s - it now accounts for just one-fifth of world production. Since 1980 pro- The pre-1973 period duction in the rest of the world has risen sharply. The At the beginning of the century the US and Russia largest increases have been in the US, Australia, China, each produced nearly half of the world's crude oil. The Canada, and Indonesia, plus significant increases in othet US continued to expand, producing two-thirds of the regions, notably in Latin America. Growth in the West- world's output at the end of WWIL It became an im- em Hemisphere has been particularly large in the 1980s porter in 1948, but limited imports until 1971. Its pro- and 1990s, with its share of world production now duction continued to grow until 1970 and then declined, more than one-third. Production costs have declined while its share steadilv fell to under 10% todav. Mexico significantly due to technology advances and new low- was the second largest exporter in the early part of the cost mines continue to come on-stream. century but disagreements with the companies caused Nearly three-fourths of world demand is in de- production to drop after 1921, and forcign oil compa- veloping countries, and the bulk of consumer demand nies were expelled in 1938. is for jewelry fabrication. During the Asian financial Production in Russia fell following the 1917 revo- crisis demand fell - actual dis-hoarding occurred in the lution and then grew slowly to the 1950s. It then grew crisis countnres - but demand is expected to continue its rapidly to become the world's largest producer in the upward trend. 1980s, but has since fallen to half its peak. Indonesia In the last several years, a number of central banks has been producing oil for more than 100 years and have been selling gold reserves, e.g., Argentina, Austra- grew significantly before falling to near zero during oc- lia, Belgium, Canada, and the Netherlands. Further sales cupation in the 1940s. Production in the Middle East are planned and this is expected to put a ceiling on prices grew modestly before \VII, beginning in Iran and Iraq, for the foreseeable future. followed by Saudi Arabia xvhich produced its first oil in 1938. After the war production in the region expanded Energy substantially. Production from other large OPEC pro- ducers commenced later - IKuwait (1946), Algeria Petroleum (1958), Nigeria (1958) and Libya (1961). In the rest of the world production rose slowly in The world petroleum market in the 20th centurv volume terms in the first part of the century, but since can be divided into two distinct periods - 1900-73 and the mid-1960s has risen by 6% per annum. Explora- 1973-99. During 1900-73 oil prices declined, particu- tion and development in non-OPEC countries acceler- larly after World War I, falling to less than $5/bbl. Oil ated partly because of nationalization of assets in many production and consumption grew by more than 7% of the OPEC countries by the 1970s, which diverted per annum, and reserves expanded greatly. The inter- significant investment to other areas. The largest growth national industry was dominated by the major oil com- has been in the North Sea, which has nrsen to about 9% panies. Low-cost production expanded at the expense of world output, but new production also commenced of higher-cost output, and the desires of producing in such areas as Mexico, Alaska, and West Africa. High governments to expand production led to falling prices. prices have made conventional development extremely A huge increase in prices beganin the 1970s as the profitable in many parts of the world, and high cost Organization of Petroleum Exporting Countries production - e.g., synthetic oil sands plants Canada - (OPEC) sought to raise oil revenues and prices sub- continues to expand. stantially by reducing production. During 1973-99, oil Oil consumption grew by about 7.5% per annum demand growth slowed to 1%, and high-cost produc- following WWII, much faster than economic growth. tion grew faster than lowest-cost production. Prices Great expansion of motorized transportation, heavy soared 1,500%vo between 1970 and 1980, and then fell industry, and electric power provided large markets for by two-thirds. Prices have since remained volatile, as petroleum products. In the early days of the industry j a n u a ry 2000 23 SPECIAL FEATURE kerosene was the major product extracted from crude d within a decade, with no indication of rising costs oil, but technical innovation led to the development of for development. At the time there was no evidence new refinery processes and production of new prod- of resource constraints, ancL probably there was a loos- ucts - mainly gasoline, diesel, and fuel oil, but a multi- ening of constraints duc to cffects of technical ad- tude of other petroleum based products, including feed- vances and increasing knowledge. stock for petrochemicals. The middle cistillate portion of the barrel - for diesel and heating oil - is the largest The post-1973 period component of the demand barrel in most regions of OPEC was formed in 1960, and by 1970, five the world. In North America, however, gasoline rep- of the countries (Iran, Saud.i Arabia, Venezuela, ILibya, resents about 43% of the refined barrel. and Kuwait) each had production between 3.0 and For most of the first part of the century, there 3.8 mb/d. Production and influence was more bal- was no world price for oil, as much of the industry anced than today, as Saudi Arabia only emerged as the was in the US. Non-US crude oil was moved within largest producer in 1971. For the group, production large companies between affiliates. When a world price was growing by 10% per annum. emerged in the late 1940s, the US price was signifi- OPEC countries raised prices several times in cantly higher because of restricted imports. Although the early 1970s, before quadrupling the price in 1973/ prices declined until 1970, prices still exceeded finding 74. An Arab oil embargo against the US and the Neth- and development costs, and the rate of return on new erlands had limited affect, as it was the reduction in investment in the Middle East was several hundred output that kept prices high. percent. At the beginning of the 1970s, Saudi Arabia In 1979/80 the Iranian revolution resulted in loss had plans to expand production to more than 20 mb/ of significant production causing prices to skyrocket. Real Crude Oil Price ($/bbl), 1900-1999 80 60 -----------------------------~---~-----------------------A --0--- ----- 20 -- ----,,,l,,-,,l,,,,,,,,,;1_ 0 iiii 111111111,1111111 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 World Crude Oil Production (mb/d) 80 80.*OPEC F CPEs lSOther_ 60 u s -------------------------------------------- _ __ _ __ ___ __ _ _ 20 --- I O ,,,, ,,, . . . . . . . .....E;3la:i0;11g81lk100111ll11E 18 1011 0i; 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 24 GLOBAL COMMODITY MARKETS COMMODITIES IN THE 20th CENTURY However, OPEC wanted to keep prices high and re- has grown about as fast as income, with much of the duced output substantially to do so. Between 1979 growth occurring in Asia. In total, world oil demand and 1985 OPEC production fell by nearly half, with outside of the FStT grew by 20 mb/d or 2.4% per Saudi Arabia becoming the swing producer. annum during 1985-99. The second price shock was more severe to the However, OPEC captured little more than half global economy and oil demand, because of its mag- of this increase because non-OPEC supplies steadily nitude and duration. In the industrial countries oil de- increased. The economics of the oil industry have mand fell significantly, unleashing conservation efforts, been turned upside down, as OPEC producers shut investment in efficiency improvements, and substitu- in low-cost capacity while high-cost output increased. tion to other fuels. In the developing countries oil Significant technological advances - horizontal drill- demand stagnated, growing mainly in oil producing ing, 3-D computer seismic, unmanned sub-sea well countries from sudden wealth and subsidized prices completions, and floating production systems - have to end-users. reduced development costs. New frontiers are open- By mid-1985 Saudi Arabia's production had ing up in the deepwater offshore and in countries that fallen by more than 80% in defense of higher prices. provide stable and attractive fiscal terms and condi- Faced with being driven out of the market, Saudi tions. In addition, substantial investment has been di- Arabia sought to regain market share by raising pro- verted away from many OPEC countries into com- duction in 1986, causing prices to collapse. peting areas, although the desire for capital and techni- But by then the world oil market had changed cal expertise has resulted in recent, limited overtures greatly. The oil companies, which had been evicted to invite the companies back. from the producing countries, became buyers of crude OPEC's production, while varied, has grown at searching for the lowest priced oil. This created ten- well below its previous rate, and has not yet returned sion between producing countries, as countries were to its 1973 level, before it substantially raised prices. tempted to produce more oil than allocated, under- Saudi Arabia, where potential is greatest and costs are mining the quota system. Futures markets for crude lowest, hasn't been able to meaningfully raise capacity oil and petroleum products were created, and oil now in a decade, and production remains some 25% be- trades like other commodities. Expectations heavily low its former peak. influence prompt and forward prices of petroleum. As we end the 20,h century, OPEC has caused Even though much oil moves under term contracts, prices to fluctuate greatly once again. The organiza- prices are tied to futures markets. tion, led by Saudi Arabia which was losing market share Since the collapse in prices, demand has increased, to Venezuela and others, decided to raise quotas in late but at a much slower rate. The industrial countries 1997, just as the Asian financial crisis was erupting. took nearly 20 years for demand to return to its former Prices collapsed toward $10/bbl before OPEC en- peak in 1978. In the developing countries demand acted a succession of production cuts, with full sup- Shares World Crude Production 1990-99 OPEC Crude Oil Production 100 (percent) 36(mb/d) 75 27 El Saudi Arabia - - - - - s flfl 18 - 25 MOPEC ~ 9 *FCPEs OI ot 00 1900 1920 1940 1960 1980 1960 1965 1970 1975 1980 1985 1990 1995 ja n u a ry 2000 25 SPECIAL FEATURE port from the new regime in Venezuela, as well as and China depends on coal for about three-quarters with support from Mexico and Norway, causing prices of its primary energy needs. to rise by 150%. Coal consumption has steadily increased in the Much of the world's production continues to be US for power generation, with virtually all produced controlled by governments while OPEC continues to domestically. Importing cou ntries, such as Japan and struggle with the trade-off between lower produc- the Republic of Korea, have also increased consump- tion and higher prices, and will likely continue to do tion, in part because of competitive prices but also to so. As long as they keep prices well above the costs diversify their dependence on imported energy re- of production, prices will remain volatile and unstable. sources. Consumption has fallen in Europe and the Small changes in production can have large impacts FSU, and has been displaced by natural gas. High-cost on prices. How demand will change in unknown, domestic European coal ouitput is being displaced by given the potential for new technology, competing fuels lower-cost imports. -particularly gas - and environmental concerns. High Coal prices rose in the 1970s and early 1980s cost output will continue to increase at the expense of along with the rise in oil prices and inflation. How- low cost production, as long as OPEC allows this to ever, coal prices have since fallen significantly along occur. with the decline in other energy prices, due to reduc- tion of costs, and low-cost exports from such coun- Coal tries as Indonesia, Colombia, and Venezuela. Advances in technology, e.g., long wall mining, and improve- Coal powered the industrial revolution, but was ments in productivity have sustained production ca- displaced by lower-cost oil this century that was more pacity and contributed to downward pressure on environmentally friendly and offered a competitive ad- prices. K >X X , but not yet enough to reduce global stocks. Soybean 5 __ ----- l_ --------- yields have been above the long-term trend in each of u s U the past three years. If global soybean vields dip be- 0 ..I....,, I... .... low trend in the coming season, then this should com- 1970 1980 1990 2000 bine with lower planted areas to reduce production Annual Prices ($/ton) and set the stage for a significant price recovery. 1000 Ecast Soybean imports are also expected to increase Constant (1990) Forecast in countries most affected by the Asian financial cri- 750 - - -…- -_--_-_--_-_--_-_-_- - _- - -- sis as the economic outlook for these countries con- tinues to improve. The Republic of Korea had about 500 - - -_ - - - - -- a 10% decline in soybean imports in 1997/98 and =0 little recovery in 1998/99, but is now expected to 250 return to the pre-crisis import levels. Taiwvan, China 250…- w _ ~~~~Current (c.i.f.Rotterdam) .......00F i also had about a 10% decline in sobean imports in Rotterdam 1997/98 and has not yet increased imports back to o the levels before the crisis. Other countries includ- 1970 1980 1990 2000 2010 ing Mexico and Indonesia are expected to increase Ssarce: USDA historial data and W}orld Bank forecasts. soybean and soybean meal imports. 56 GLOBAL COMMODITY MARKETS FATS, OILS, AND OILSEEDS SOYBEANS Other Developments * Genetically modified (GM, seeds continue to cause to allow markets the opportunity to segregate uncertainty for producers of soybean and other GMO products. However, it is likely that GM crops oilseeds. The recentlv signed international trade will continue to face opposition from European agreement on genetically altered organisms allows and Japanese buyers, and probably an increasingly a country to ban the imports of genetically modi- large group of consumers and policy makers. For fied food xvithout full scientific proof that they are example, the government of the Brazilian state of unsafe. The agreement postponed the decision of Rio Grande do Sul is reportedly offering low in- whether and how countries should be notified if terest loans to farmers who stop growing GM GMO products are being shipped for two years soybeans (Public Ledger, 12/13/1999). PRODUCTION AND CRUSH TRADE AND STOCKS 1996/97 1997/98 1998/99 1999/00 1996/97 1997/98 1998/99 1999/00 Production (000 tons) Exports (000 tons) US 64,780 73,176 74,598 72,747 US 24,110 23,761 21,813 23,541 Brazil 27,300 32,500 31,000 31,000 Brazil 3,360 8,750 8,900 9,200 Argentina 11,200 19,500 19,900 18,500 Argentna 750 3,231 330 2,800 China 13,220 14,728 15,000 14,000 Paraguay 2,150 2,390 2,400 2,400 India 4,100 5,350 6,000 5,500 World 37,020 40,510 39,160 40,920 Paraguay 2,771 2,988 3,000 3,000 Imports (000 tons) EU 1,144 1,570 1,535 1,413 EU 15,311 16,297 16,143 16,043 Indonesia 1,460 1,306 1,300 1,300 Japan 5,043 4,873 4,650 4,600 World 132,193 158,072 158,931 154,120 China 2,309 2,975 3,885 4,335 Crush (000 tons) Mexico 2,680 3,479 3,600 3,700 US 39,080 43,464 43,262 43,817 Taiwan, China 2,632 2,387 2,200 2,300 Brazil 18,910 21,900 21,400 21,400 Korea, Rep. 1,486 1,340 1,450 1,500 Argentina 10,423 16,782 16,800 15,700 Brazil 1,450 500 700 900 China 8,690 10,728 11,850 11,50C Indonesia 684 810 1,150 1,200 India 3,650 4,770 5,400 4,900 World 36,160 38,970 39,340 41,040 Mexico 2,690 3,600 3,720 3,785 Ending Stocks (000 tons) Japan 3,810 3,720 3,680 3,520 US 3,588 5,438 9,471 10,750 Taiwan, China 2,362 2,043 1,900 2,000 Brazil 475 560 470 480 Korea, Rep. 1,246 1,100 1,150 1,20C Argentna 393 570 310 250 World 113,772 131,730 131,982 131,444 World 6,928 8,999 12,579 13,650 Source: USDA Source: USDA GLOBAL SUMMARY Actual - Est. - -Annual Growth Rate l/o) - World Balance (mil. tons) 1970/71 1980/81 1990/91 1997/98 1998/99 1999/00 1970-80 1980-90 1990-98 Production 44.3 81.0 104.2 158.1 158.9 154.1 6.85 1.85 5.16 Consumpton 48.0 84.3 104.0 153.7 152.6 152.8 6.52 2.06 4.87 Ending Stocks 3.6 11.5 13.0 9.0 12.6 13.7 13.52 0.24 -3.57 Crop Area (mil. hectares) 30.0 49.9 54.3 69.0 70.7 70.0 5.25 0.79 2.88 Yields (tonslhectare) 1.48 1.63 1.92 2.29 2.25 2.20 1.51 1.07 2.18 Actual Forecast Price ($/ton) 1995 1996 1998 1999 2000 2001 2002 2005 2010 Current 259.3 304.8 243.3 201.7 220.0 230.0 240.0 250.0 275.0 Constant 1990 217.3 267.4 233.5 194.7 207.3 211.4 215.0 209.2 203.6 Note: All quantities are in local marketing years. Prces are for US soybeans, c.i.f. Rotterdam in calendar years. Source: USDA historical data and estmates and Wodd Bank price forecasts. ja n u a ry 2000 57 AGRICULTURE Grains Monthly Prices ($/ton) 260 Grain prices are expected to increase in 2000 as Trade Weighted global production and stocks continue to fall, 220 EXPrt Pce------------------ consumption increases, and market sentiment begins to shift. However, the level of yields in 180 __ -------------------------- the coming season will largely determine the 180 extent of the price recovery. If global yields are above trend, prices may stay low. 140- 100 . . , 1.,, The Vorld Bank's index of grain prices has fallen Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 about 40N/0 since the peak in 1996. Following previ- ous periods of sharp price declines, grain prices re- 2000 bounded as production fell and consumption rose. A Production* similar pattern is expected this year as the supply/de- 1750- mand balance shifts away from surplus and grain -' stocks fall. However, yields hold the key to the price 1500- recovery and thus pnces could be volatile as each new crop development is evaluated during the next six months of the Northern Hemisphere season. If grain 1250 a Consumption ---------- yields are above trend in the coming crop year, then prices could remain low for another year. But, if yields 1000 are reduced because of poor weather related grow- 1970 1980 1990 2000 ing conditions, then prices could rise sharply. Ending Stocks (nillion tons) The world's grains markets have already begun 500 to adjust to current surpluses and the stage is set for World a price recovery. Since 1997/98, world grain pro- 375 -------- - ------------- duction has declined 22 million tons, consumption has increased 14 million tons and trade has increased 250 - --------- 7 million tons. World production declined in each 't . 's of the past two years, while area planted to grains 125 ------- At- ' ,-7 has fallen for three consecutive years. However, yield - ^ vMajor Exporters"* increases offset lower area planted and prevented 0 I ..*... production from falling enough to significantly re- 1970 1980 1990 2000 duce stocks. Consumption and trade are expected A ($/ton) to increase in response to low grain prices and the 500 recovery in Asian economies following the 1997 fi- ; Constant (1990) Forecast nancial crisis. The increase in crude oil prices should ' 375 - - -…-- - - -- - - - - also contribute to demand growth in the major oil 3 exporting countries. W'hile it is difficult to forecast grain prices, it is 250 ,- s- - - less difficult to explain the factors which determine grain prices. Based on the econometrically estimated 125 -- - relationship of grain prices to stock levels, grain prices Current are about 10% below their historical norms relative 0 c. I I E ...aa to stocks. This is not unusual when prices have fallen 1970 1980 1990 2000 2010 sharply and it usually precedes an increase in prices. *Includes milled rice. It suggests, that prices could rise quicklv whenl the **Argentina, Australia, Canada, EU, and US. market sen,ment changes. Source: USDA historial data and World Bank forecasts. market sentiment changes. 5 8 GLOBAL COMMODITY MARKETS GRAINS Other Developments * Delegates from 140 countries met in Montreal in late while groups opposing the use of GMOs wanted January and negotiated an international trade agree- tight controls. A key issue was whether and how coun- ment on genetically altered organisms-grains, bacte- tries should be notified if GMO products are being na, and farm animals. The agreement allows a coun- shipped. The agreement postponed this decision for try to ban the imports of genetically modified food two years to allow markets the opportunity to segre- without full scientific proof that it is unsafe. The US gate GMO products. The US plants more than one- and a handful of other countries which pioneered the third of its cotton, corn and soybeans with GMOs. research and development of genetically modified (Washinglon Post, 1/24 and 1/30/2000). organisms (GMO) wanted relatively loose controls PRODUCTION AND STOCKS TRADE 1996/97 1997/98 1998/99 1999/00 1996/97 1997/98 1998/99 1999/00 Production (000 tons) Exports (000 tons) China 388,458 378,443 393,934 395,100 US 81,293 76,290 87,039 87,275 US 333,154 333,730 346,994 335,662 EU 62,472 55,413 61,901 64,516 EU 203,991 205,408 210,193 199,972 Australia 24,248 19,374 21,415 21,790 India 177,758 182,602 181,731 185,500 Canada 24,899 23,880 17,911 21,025 Russian Fed. 66,799 85,265 46,065 55,115 Argentina 22,575 24,831 16,725 19,875 Canada 57,995 49,395 50,896 52,000 China 5,904 11,097 6,198 8,350 Brazil 46,260 39,465 43,208 43,912 Thailand 5,296 6,474 6,225 5,925 Indonesia 38,034 36,818 38,600 38,300 World 215,500 214,800 221,500 221,700 Argentina 35,611 40,125 30,315 34,660 Imports (000 tons) Australia 34,921 29,892 30,967 31,605 EU 41,580 43,888 42,965 43,668 Mexico 29,865 27,053 28,098 29,575 Japan 27,292 27,653 27,262 26,910 Turkey 26,110 26,270 29,307 26,735 Korea, Rep. 12,195 11,582 12,561 13,265 Poland 25,296 25,403 27,150 25,580 Mexico 7,634 10,454 11,670 11,015 World 1,871,403 1,878,907 1,869,183 1,857,976 Egypt 10,184 10,490 11,215 10,775 Ending Stocks (000 tons) Iran, Isl. Rep. 10,030 7,307 4,056 9,600 China 96,261 87,190 94,726 96,676 Brazil 7,258 9,575 8,550 8,900 US 39,949 58,693 78,072 86,465 Saudi Arabia 8,133 5,945 6,975 6,850 EU 27,514 38,941 44,866 37,302 Algeria 4,861 6,574 6,140 6,245 India 17,520 21,301 22,478 27,278 Taiwan, China 7,043 5,788 5,688 5,403 World 293,834 330,045 347,516 346,828 World 215,500 214,800 221,500 221,700 Source: USDA Source: USDA GLOBAL SUMMARY Actual - Est. - -Annual Growth Rate (°/O)- VWrld Balance (mil. tons) 1970/71 1980/81 1990/91 1997/98 1998/99 1999/00 1970-80 1980-90 1990-98 Production 1,078.7 1,429.6 1,768.9 1,878.9 1,869.2 1,858.0 2.90 1.49 1.10 Consumpton 1,130.8 1,475.5 1,743.2 1,842.7 1,851.7 1,858.7 2.67 1.69 0.73 Exports 109.6 214.7 202.1 214.8 221.5 221.7 6.28 0.24 0.56 Ending Stocks 192.8 287.9 338.9 330.0 347.5 346.8 6.68 0.67 -3.18 Crop Area (mil. hectares) 663.0 722.1 694.3 690.2 685.4 674.3 0.90 -0.57 0.12 Yields (tons/hectare) 1.78 2.16 2.79 2.99 3.00 3.01 1.97 2.18 1.02 Actual Forecast Price ($1ton) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Current 166.5 201.0 153.7 131.0 115.9 123.7 134.2 158.3 167.9 Constant 1990 139.7 176.0 141.8 125.8 111.9 116.5 123.3 132.2 123.8 Note: Quantities are in local marketng years. Production and yields are based on milled rice. Prices are the trade weighted average of US maize, US HRW wheat, and Thai 5% broken white rice in calendar years. Source: USDA historical data and estimates and World Bank price forecasts. j a n u a ry 2000 59 AGRICULTURE M aize Monthly Prices ($/ton) Maize prices are expected to increase in 2000, 160 as production contracts in response to current US No. 2 fo.b. low prices and stocks fall. Prices are below 135 -________________-______________ levels suggested by the historical relationship of stocks-to-use and are due to increase after 110 - --------------- three years of sharp decline. CBOT 85 r ~~~~~~~~Futures 85 ->~trf! Maize prices ended the year weak, but slightly above their July lows. The US maize export price 60 .......' "... ......... . . for 1999 averaged $90.2/ton - the lowest level (in Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 current $s) since 1987 when prices averaged $76/ World Balance (million tons) ton. The 1999 price was about $11/ton below the 700 econometrically estimated price which should have occurred based on the relationship of ending stocks 575 _--------------------------- to total use, and this suggests that prices could rise Produiction - quickly if market sentiment changed because of a 450 ------------ ---------- shortfall in production or an increase in demand. The current price decline has seen US maize 325 -V export prices fall 46% in three years from an aver- Consumption age of $166/ton in 1996. This compares with the 200 I. . , . ... ...I....... ,, . __ sharp price decline from 1984 to 1987 when maize 1970 1980 1990 2000 prices fell 44% in three vears from $136/ton to $76/ton. Markets are not botnd by history, but 180 Ending Stocks (million tons) nevertheless, maize prices have not decline four consecutive years since at least 1960. Following 135- the sharp decline from 1984 to 1987, maize prices rose 41% in 1988 as production and stocks fell. We do not project maize prices to rise sharply this 90 ------- year, but higher prices are expected as demand ; ; and supply continue to adjust to current low prices. 45 It4 --------- If yields were to fall due to drought or other Mtajor Exporters* ' ' weather related causes, then production could 0 .'' . decline enough to send prices higher. Futures 1970 1980 1990 2000 prices are indicating higher prices for the new crop Annual Prices ($/ton) and early January prices have been strong. 400 Trade has not responded as much to low Constant (1990) Forecast prices as might have been expected due in large 300 -- t- --- part to the effects of the Asia crisis. Imports bv the East Asia 5 crisis countries (Indonesia, Malay- 200 4-- A - - - - - sia, Philippines, Rep. of Korea and Thailand) fell *, from 12.4 million tons in 1996/97 (before the 100 crisis) to 10.9 million tons in the 1997/98 crisis t (US No. 2) year. USDA's forecast for current year imports are Cret(SN.2 for a 9.6%'s increase over last vear. Imports to the . ' .~ ~~~~~ 1970 1980 1990 2000 2010 Middle East are expected to return to pre-crisis 1970 i 19o0 1990 2000 201 levels this year after declining 20% following the Source: USDA historial data and World Bank forecasts. Asian crisis because of sharply lower oil prices. 60 GLOBIAL COMMODITY MARKETS GRAINS MAIZE Other Developments * The US's Environmental Protection Agency has cide on the refuges unless they can prove pests have placed restrictions on the cultivation of genetically exceeded certain levels. Biotech seed producers and modified maize in the US., effective on January 15. farmers must monitor insect populations for the The new restrictions, require farmers who plant GM emergence of insecticide resistance. The regulations maize to plant "refuges" of conventional maize near require seed producers to develop grower agree- their GM maize to reduce the pressure on insects ments with farmers or produce educational materi- and delay the evolution of resistance in pest popula- als to ensure compliance. (Washin,gtoz Post, 1/16/ tions. Farmers will not be allowed to spray insecti- 2000) PRODUCTION AND STOCKS TRADE 1996/97 1997/98 1998/99 1999/00 1996/97 1997/98 1998/99 1999/00 Production (000 tons) Exports (000 tons) US 234,518 233,864 247,943 242,254 US 46,579 37,697 51,886 47,500 China 127,470 104,300 132,954 128,000 Argentina 10,203 12,756 7,849 8,800 EU 34,794 38,522 35,041 36,215 China 3,892 6,173 3,338 5,000 Brazil 35,700 30,080 32,110 33,000 Hungary 1,122 1,289 1,766 1,700 Mexico 18,922 16,934 17,600 19,000 S. Afrca, Rep. 2,200 1,041 1,000 1,100 Argentina 15,500 19,360 13,500 15,500 World 67,074 62,887 68,832 67,720 India 10,612 10,852 10,780 10,500 Imports (000 tons) Romania 9,610 12,680 8,500 10,000 Japan 15,963 16,422 16,336 16,250 Canada 7,380 7,180 8,952 9,096 Korea, Rep. 8,336 7,528 7,517 8,250 S. Africa, Rep. 10,136 7,544 7,100 8,500 Mexico 3,141 4,376 5,612 4,700 World 592,040 573,423 605,054 600,721 Taiwan, China 5,741 4,474 4,575 4,500 Ending Stocks (000 tons) Egypt 3,196 3,259 3,700 3,700 US 22,433 33,220 45,630 51,780 Malaysia 2,485 2,145 2,500 2,600 China 45,000 26,000 38,616 41,916 EU 2,595 2,065 3,000 2,500 EU 3,280 4,343 3,889 3,209 Colombia 1,674 1,694 1,570 1,700 S. Africa, Rep. 2,450 1,550 1,400 1,400 Saudi Arabia 1,272 1,234 1,500 1,500 Brazil 2,633 809 844 1,144 Venezuela 1,494 1,161 1,500 1,250 Argentina 750 1,612 713 714 Peru 840 1,228 1,000 1,200 Thailand 222 134 284 384 Brazil 513 1,324 968 1,000 World 92,940 86,482 108,493 115,383 World 67,074 62,887 68,832 67,720 Source: USDA Source: USDA GLOBAL SUMMARY Actual -Est. - -Annual Growth Rate (/o) - VWorld Balance (mil. tons) 1970/71 1980181 1990/91 1997/98 1998/99 1999/00 1970-80 1980-90 1990.98 Production 268.1 408.5 482.4 573.4 605.1 600.7 4.2 1.2 2.7 Consumption 273.0 421.9 475.0 581.3 583.0 593.8 4.1 1.6 2.7 Exports* 32.2 84.9 64.5 71.9 75.5 75.2 9.5 -0.7 1.4 Ending Stocks 36.1 85.5 80.9 86.5 108.5 115.4 10.8 -0.7 1.5 Crop Area (mil. hectares) 112.5 131.1 128.5 135.6 138.3 140.1 1.5 -0.1 0.9 Yields (tonslhectare) 2.38 3.12 3.75 4.24 4.35 4.29 2.7 1.3 1.8 Actual Forecast Price ($/ton) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Current 165.8 117.1 102.0 90.2 100.0 110.0 115.0 125.0 130.0 Constant 1990 145.5 108.0 97.9 87.1 94.2 101.1 103.0 104.6 96.2 *Includes intra-EU trade. Note: Quantities are in local marketing years. Prices are for US No. 2 maize, f.o.b. US Gulf in calendar years. Source: USDA historical data and estimates and World Bank price forecasts. ja n u a ry 2000 61 AGRICULTURE Rice Monthly Prices ($/ton) Prices will remain low in 2000 due to 400 lower imports and expected large Thai 5% f.o.b. harvests in major producing countries. 325 -BOT However, higher prices for wheat and CBOT Futures other grains are expected to provide 250 --- -------- some support to rice prices. 175 ____________ -------__ Thai 5%K broken white rice prices fell sharply ...... . ...I.,..l. in October and then recovered most of the loss by 10- December as import demand shifted with policy changes and revised crop estimates. USDA's De- World Balance (million tons) cember estimate of world rice production for the 400 1998/99 vear has been raised 5,0 million tons (milled basis) since our last report while the estimate of con- 350 Production (Milled-)- sumption has been raised by only 0.7 million tons. P The estimate of world stocks was raised due to the 300 …------ ----------------- higher production, but historical figures were also - raised substantially due mostlv to revised estimates 250 ------ ------------_____ of China's stocks. - onsumption World rice production for the 1999/00 market- 200 I I , , I I , , , I . . . . ... . . ing year is estimated to be up 4.7 million tons from 1970 1980 1990 2000 1998/99 while consumption is projected to be up 5.5 Ending Stocks (milion tons) million tons. Production is stllH expected to exceed 80 consumnption and contribute another 1.7 million tons to world stocks. WNorld trade in the 1999/00 market- 60 World ing year is now estimated by USDA to total 23.6 mil- lion tons down 1.6 million tons from the previous / - year. Private sector forecasts suggest trade will be even lower than the USDA estimate. However, with the improvements in the global economy, trade may 20 ----------------------------------- exceed mid-year estimates as was the case last year. Recent market weakness was due in part to 0 , , I, I policy changes in Indonesia, which began with a ban 1970 1980 1990 2000 on imports of low and medium quality rice by the Annual Prices ($/ton) private sector in September. Indonesia, the world's 1600 1 ; ; i largest rice importing country, has now removed the Constant (1990) Fort ban and imposed a nearly 30% import tariff, effec- 1200 - ----------------------- I ~ ~ ~ ~ ~ ~ ~~ I tive January 1"' to buffer its domestic market from , ;00000;000i0000 low world prices. The government marketing au- 800 ----------------- thority, BULOG, will also play a smaller role in the ; ', future as the private sector is allowed to import all 400 '---_-_' ------ qualities of rice. The government has also indicated that BULOG will no longer be responsible for sup- 0 ~Curret,gy 5%) plying rice to the military and civil servants begin- 1970 1980 1990) 2000 2010 ning in April. BULOG will sill be responsible for providing rice to the poor, but it is expected to play a Source: USDA historial data and WVorld Bank forecasts. more limited role than in the past. 62 GLOBAL COMMODITY MARKETS GRAINS RICE Other Developments * "Golden rice", a new strain of genetically altered rice the leading cause of blindness and a malaise that af- has been developed after 10 years of research and fects as many as 250 million children. The United $100 million of funding by the Rockefeller Founda- Nations estinates that vitamin A Deficiency may cause tion. The new rice contains three transplanted genes 2 million deaths each year among children under 5 that allow plants to produce rice carrying beta-caro- years of age. The new nrce could be widely available tene which is converted into vitainin A within the in as little as two years. (Washinbgton Post, 1/14/2000) body. The new rice can combat vitamin A deficiency PRODUCTION AND STOCKS TRADE 1996/97 1997/98 1998199 1999/00 1996197 1997/98 1998/99 1999/00 Production (000 tons of paddy) Exports (000 tons) China 195,100 200,700 198,714 201,429 Thailand 5,216 6,367 6,100 5,800 India 121,980 123,462 127,123 126,763 Vietnam 3,327 3,776 4,500 4,100 Indonesia 49,360 49,237 50,791 50,791 US 2,292 3,165 2,750 3,000 Vietnam 27,277 28,930 30,253 30,000 China 938 3,734 2,800 2,850 Bangladesh 28,326 28,296 28,653 29,253 Pakistan 1,982 1,800 1,850 2,000 Thailand 20,700 23,500 22,800 23,333 India 1,954 4,491 2,400 1,500 Myanmar 15,517 15,345 16,034 16,466 Uruguay 640 639 725 700 Philippines 11,177 9,982 10,268 11,769 World 18,799 27,280 24,483 23,191 Japan 12,930 12,532 11,201 11,470 Imports (000 tons) Brazil 9,504 8,551 11,450 10,000 Indonesia 808 6,081 3,900 3,000 US 7,783 8,301 8,529 9,603 Brazil 845 1,457 850 1,100 Pakistan 6,461 6,500 7,012 7,201 Bangladesh 44 2,499 1,400 900 World 563,722 573,974 581,518 587,792 Philippines 814 2,187 1,200 900 Ending Stocks (000 tons) Iran, Islamic R. 973 500 650 900 China 25,556 26,723 26,473 27,023 Nigeria 731 900 900 850 India 9,500 10,500 11,000 12,000 Saudi Arabia 660 775 750 800 Indonesia 1,530 3,529 4,025 3,425 Japan 546 479 725 750 Philippines 1,590 1,273 1,747 1,847 EU 844 787 700 750 Thailand 708 1,051 1,099 1,699 Iraq 684 610 700 700 Korea, Rep. 390 805 980 1,330 Malaysia 645 593 650 675 World 51,290 54,667 57,370 58,682 World 18,799 27,280 24,283 23,191 Source: USDA Source: USDA GLOBAL SUMMARY Actual -Est.- -Annual Growth Rate (/6) - World Balance (mil. tons) 1970/71 1980/81 1990/91 1997/98 1998/99 1999/00 1970-80 1980-90 1990-98 Production (milled) 213.0 270.0 352.1 386.6 391.8 396.5 2.81 2.54 1.23 Consumption 210.6 275.0 347.4 383.3 389.3 394.8 2.85 2.58 1.27 Exports* 8.6 12.7 12.2 27.3 25.2 23.2 4.02 1.09 8.30 Ending Stocks 28.8 48.5 59.2 54.7 57.1 58.7 7.02 0.74 -0.43 Crop Area (mil. hectares) 132.7 144.5 146.6 151.3 152.2 153.8 0.77 0.08 0.22 Yields (tonslhectare) 2.35 2.75 3.56 3.79 3.82 3.84 2.03 2.54 0.81 Actual Forecast Price ($1ton) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Current 338.9 303.5 304.2 248.4 260.0 270.0 280.0 315.0 345.0 Constant 1990 297.3 280.0 291.9 239.9 244.9 248.2 250.8 263.6 255.4 *Milled basis in calendar years. Note: Production and yields are paddy in marketing years. Consumption and stocks are on a milled basis in marketng years. Trade is on a milled basis in calendar years. Prces are for Thai 5% broken WR, milled, f.o.b. Bangkok in calendar years. Source: USDA historical data and es6mates and World Bank price forecasts. j a n u a r 2000 63 AGRICULTURE Whe at Monthly Prices ($/ton) Wheat prices are expected to increase this 200 year after the sharpest three year decline fUSHRWfo.b. in at least four decades. However, high 165- - - - - - - - - - - - - - -- stocks will keep prices from rising sharply. CBOT 130 ~~~~~~~~~~ >_ > Futures The US wheat export price ended the year at a December average of $102.2/ton, the loNvest monthly 95 --------------------------- average price since 1986, and down 61% from the high in May 1996. The year-on-year decline since the 60 ........... I.. ....... high in 1996 was the sharpest of any three year period Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 in at least four decades. Prices are expected to re- World Balance <(million tons) bound from current low levels as surpluses fall and 620 the sentiment of the market shifts. Produiction Despite faUing prices, the fundamentals of the 540 … ----- world wheat market improved slightly in 1999 with production and stocks both declining for the second 460 _ _ ------------------- consecutive vear. Area harvested has declined 6% since the high in 1996/97, however this was offset by 380 - ------------------------- a 6.7% increase in yields. The world stock-to-use per- C ut centage is projected to fall to 21.9 by the end of the 300 . . . . .I X . . current marketing year compared to 23.8 two years 1970 1980 1990 2000 ago. Ending stocks held bv the five largest exporting countries remain high, leading to aggressive competi- Ending Stocks (million tons) 200- tion for exports and weak prices. Word World wheat trade is increasing in response to 15W---- both low prices and improving economic conditions 150- in developing and industrial countries. World trade is projected to reach a seven year high of 104 million 100 -------------- tons during this marketing year, as imports increase in Latin America (Bolivia, Ecuador, Peru, Venezuela), the 5-- FSU (Russia, Ukraine and Uzbekistan), and the Middle -major Exporters, "I East (Algeria, Islamic Republic of Iran, Jordan). Im- 0 .,. . . I,,, ., .,, I, . ports into the East Asian crisis countries have generally 1970 1980 1990 2000 not increased relative to last year or relative to pre- Annual Prices ($/ton) crisis levels. 500 The decline in world wheat prices in 1999 ex- Constant (1990) Forecast ceeds what was expected based on the econometrically 375 -_+--__ ------------------------ estimated relationship of prices to ending stock lev- els. According to this relationship, world wheat prices 250 - . should have averaged $120.2/ton in 1999 instead of the actual $112.0/ton. It is not unusual for prices to 125 differ from their historical relationship to stocks and 1 in the past such deviations have often led to a price Current (US No. 2) 0n ,p , ,, I ........ change which remove the differential. Prices are pro- 1970 1980 1990 2000 2010 jected to increase to $122/ton in 2000, and $130/ton in 2001 as demand and supply adjust to current low *Argenuina, Australia, Canada, EU, and US. Surce: USDA historial data and WDrld Bank forecasts. prices. 64 GLOEBAL COMMODITY MARKETS GRAINS WHEAT Other Developments *A port strike in British Columbia, Canada has brought the entire railway network. (Public Ledger, 1/17-23/ grain and oilseed exports from Vancouver to a stand- 2000) still. The strike, which began in late December, was * An ongoing rail strike in Western Australia could lead at BC Rail's wholly-owned subsidiary Vancouver to major delays in wheat shipments. The strike which Wharves. MIediated talks over company demands for began in early December has paralyzed shipments to concessions to increase productivity failed and no new ports. (PublicLedger, 12/20/2000) negotiations have been scheduled. The strike closed * Low xwheat prices have led to a number of govern- PRODUCTION AND STOCKS TRADE 1996/97 1997/98 1998/99 1999/00 1996/97 1997/98 1998/99 1999/00 Production (000 tons) Exports (000 tons) China 110,570 123,300 109,730 115,000 US 27,039 28,090 29,035 29,000 EU 98,506 94,181 103,036 96,560 Canada 18,167 21,283 14,388 18,500 India 62,097 69,350 65,907 71,500 Australia 18,223 15,398 16,000 18,000 US 61,980 67,534 69,327 62,812 EU 17,834 14,196 16,000 16,000 Russian Fed. 34,900 44,200 26,900 30,500 Argentina 10,073 9,566 8,700 10,000 Canada 29,801 24,280 24,076 26,850 Kazakhstan 2,026 3,375 2,072 3,300 Australia 23,702 19,417 22,110 23,000 Turkey 967 1,306 3,000 1,500 Pakistan 16,907 16,650 18,694 17,854 World 101,976 102,034 101,110 103,635 Turkey 16,000 16,000 18,500 16,500 Imports (000 tons) Argentina 15,900 14,800 12,000 14,500 Egypt 6,893 7,156 7,300 6,700 Ukraine 13,550 18,404 14,937 14,000 Brazil 5,662 5,758 7,290 6,700 Kazakhstan 7,700 8,950 4,700 11,000 Iran, Islamic R. 7,048 3,587 3,000 6,500 Mexico 3,107 3,639 3,250 3,100 Japan 6,264 6,200 5,883 5,900 World 582,751 609,330 588,656 584,164 Korea, Rep. 3,465 3,917 4,689 4,500 Ending Stocks (000 tons) Algera 3,628 5,221 4,400 4,500 US 12,073 19,663 25,744 27,947 Pakistan 3,018 3,562 3,200 3,000 China 24,166 33,366 27,836 26,336 Russian Fed. 2,572 3,028 2,500 3,000 EU 14,758 16,050 20,440 16,253 Mexico 1,940 2,166 2,500 2,500 India 7,000 10,081 10,638 14,188 Iraq 1,135 2,707 2,500 2,500 Canada 9,047 6,009 7,365 7,415 Yemen, Rep. 2,292 2,366 2,100 2,000 Australia 2,395 1,348 2,400 2,325 China 2,692 1,914 1,000 1,000 World 115,039 139,214 135,997 131,144 World 101,976 102,034 101,110 103,635 Source: USDA Source: USDA GLOBAL SUMMARY Actual -Est. - -Annual Growth Rate (%) - World Balance (mil. tons) 1970/71 1980/81 1990/91 1997/98 1998/99 1999/00 1970-80 1980-90 1990-98 Production 306.5 436.3 588.0 609.3 588.7 584.2 3.45 2.07 0.79 Consumpton 329.5 444.0 561.9 585.2 591.9 591.1 3.08 2.39 0.57 Exports 55.0 94.1 101.1 102.0 101.1 103.6 5.51 1.79 -1.21 Ending Stocks 80.5 113.9 145.0 139.2 136.0 131.1 6.11 0.60 -1.98 Crop Area (mil. hectares) 207.0 237.1 231.4 227.9 224.7 216.5 1.28 -0.69 0.29 Yields (tonslhectare) 1.48 1.84 2.54 2.67 2.62 2.70 2.13 2.79 0.48 Actual Forecast Price ($1ton) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Current 177.0 207.6 126.1 112.0 122.0 130.0 140.0 160.0 170.0 Constant 1990 148.5 182.1 121.1 108.2 114.9 119.5 125.4 133.9 125.8 Note: Quantites are in local marketng years, except export and imports which are in July/June years.Prices are for US HRW No. 2 wheat, fo.b. US Gulf in calendar years. Source: USDA historcal data and estimates and Word Bank price forecasts. ja n u a ry 2000 65 AGRICULTURE Bananas Monthly Prices ($/ton) Prices reached a 6-year low in October, 750 averaging 27.4% lower than a year ago. Large f.o.t. IJS ports apple and citrus production in Europe added 625 ------ -------------------- to an already depressed banana market. Banana prices (f£o.t. US ports) averaged $333/ 375 --------------t-A- ton during the last quarter, 18.1% lower than the third quarter's average of $406.4/ton, and 27.4% lower than 250 ........ ,. .l.. ........ . I ...... .,,,. a year ago. In addition to the typical cyclical decline, Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 excessive production of apples and citrus in Europe Gross Exports (milion tons) pushed prices down more than originally anticipated. 14 Ecuador, the world's dominant exporter, shipped 3.85 million tons of bananas during 1998. 11 __- _------------------ --- For the 10 months of 1999, banana exports from Ec- World - , uador, reached 3.63 million tons and assuming that 8------________-- the same trend holds for the months of November and December 1999, total exports for 1999 will be 5 . *.-- 1.5 to 2.0% higher than 1998. However, according Latin America to Ecuador's agriculture ministry, total export earn- ..I, . .. ... ...i,, ings fell to $861 million in January-November from 2 $962 million during the same period of 1998. Ex- 1970 1980 1990 2000 ports from Costa Rica, the world's second largest Net Imports (million tons) banana exporter, reached 2.05 million tons in 1999, 12 down 2% from 1998. World Oln the import side, it appears that the banana 9---------------- ____ ----- market is recovering. US imports reached 3.85 mil- hon tons in 1999, up 10% from 1998. Japanese im- 6 --- _-__ ports also increased by 10%. Imports by the Repub- lic of Korea have picked up: for the first 1 1 months 3…_- - of 1999 it imported 131 thousand tons, compared to ._ -s 86 thousand tons in all of 1998. Imports by Russia, o , ,, . a I . . the fourth largest importer following the US, EU, 1970 1980 1990 2000 and Japan, have also picked up. In August to Octo- Annual Prices ($/ton) ber this year, Russia imported 72 thousand tons from 900 Ecuador compared to 29 thousand tons last year. Forecast Banana prices have been unusually low in 1999 700 --------------------------------- by historical standards, and given the fact that apple Constant (1990) and citrus production in Europe has been at record 5 ,. _ levcls, it will take a few months before prices recover. ' WYe expect therefore, prices to average about $400/ 3 ton during 2000 and pick up considcrably during 2001. 300- Current Note: Starting this January, we have switched to a new price 100 I ....I.I.I I I.I.I.... I... . .II I series for bananas. We believe that the new series better reflects 1970 1980 1990 2000 2010 market conditions and is closer to a free market f ob. price. We have also added a European prices series. Details can be found Source: FAO data and World Bank forecasts. in the "Description of Price Series" section of this report. 66 GLOBAL COMMODITY MARKETS OTHER FOOD BANANAS Other Developments * The EU Commission adopted a proposal for modi- irnplying a zero ACP tariff if the tariff within the quota fving its banana regime in November 1999. The did not exceed euto 275/ton. The licensing methods Commission's proposal is based on a single tariff fol- under consideration are traditional/newcomer based lowing a 6-year transitional period during which there on a historicalreference period, first-come/first-served, will be a tariff quota with preferential tanrff access from simultaneous exanmination, and auctioning. ACP countries. During the transitional period the fol- * As a result of a weak banana market, Chiquita Brands lowing Tariff Rate Quotas (7FRQs) will apply: (i) 2.2 International, Inc. announced that it will suspend the million tons at euro 75/ton which is bound in the EU common stock dividend for this year. There are also WTO schedule; (ii) 353,000 tons would also be added talks that Chiquita may sell part or all of its opera- at the same tariff; and (iii) 850,000 tons would be open tions. Its rival Dole Food Co. also announced that it to both ACP and non-ACP bananas but for ACP ac- will close its banana operations in Nicaragua and Ven- cess, a preference of euro 275/ton would be accorded, ezuela according to Bloomberg GROSS EXPORTS (000 tons) NET IMPORTS (000 tons) 1995 1996 1997 1998 1995 1996 1997 1998 Ecuador 3,737 3,842 4,446 3,848 US 3,266 3,368 3,354 3,505 Costa Rica 2,033 1,933 1,835 2,101 EU 3,125 3,164 3,139 2,983 Colombia 1,336 1,407 1,509 1,436 Japan 874 819 885 865 Philippines 1,213 1,253 1,143 1,147 China 160 513 547 539 Guatamela 646 611 659 632 Russian Fed. 503 307 881 475 Panama 693 634 602 463 Canada 400 408 417 417 Honduras 522 637 557 433 Poland 227 238 242 277 Mexico 110 163 240 280 Argentina 201 248 252 243 Cote d'lvoire 173 193 191 200 F. Yugoslavia 117 155 195 169 Cameroon 171 191 179 132 Saudi Arabia 167 153 147 144 Nicaragua 54 78 70 103 Chile 145 151 137 135 China 47 57 52 73 Turkey 88 97 111 123 Venezuela 32 40 68 72 Czech, Rep. 160 147 132 115 Saint Lucia 113 102 74 71 Korea, Rep. 122 124 136 86 Brazil 13 30 40 69 New Zealand 72 70 74 73 Dominican R. 94 80 64 65 Switzerand 75 74 74 73 Jamaica 85 86 79 63 Hungary 66 35 54 65 Belize 52 65 63 53 Syran Arab R. 53 48 60 61 St. V. & Gren. 44 50 33 39 Norway 60 61 58 58 Malaysia 35 27 26 30 Slovakia 56 77 63 58 Dominica 32 40 35 29 UAE 45 56 64 44 Sudname 34 27 29 23 Iran 120 50 40 40 WdrId 11,375 11,712 12,124 11,489 WoVld 10,536 10,787 11,466 10,979 Source: FAO Source: FAO GLOBAL SUMMARY Actual - Annual Growth Rate (/6) - World Balance (000 tons) 1970 1980 1990 1996 1997 1998 1970-80 1980-90 1990-98 Producton 31,777 36,969 47,177 56,653 59,750 55,841 1.31 3.00 2.93 Gross Exports 5,731 6,886 11,364 11,712 12,124 11,489 0.43 2.23 5.79 Net Imports 5,585 6,680 10,567 10,787 11,466 10,979 0.87 1.75 5.67 Actual Forecast Price ($lton) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Current 469.6 517.1 489.5 373.2 399.6 452.0 490.6 529.1 540.1 Constant 1990 411.2 477.1 469.8 360.4 376.5 415.4 439.5 442.7 399.8 Source: FAO and World Bank. j a n u a ry 2000 67 AGRICULTURE Shrimp 1800 Monthly Prices (¢/kg) Prices rose during the holiday season due to strong demand and weak production. Prices 1600 ------------- will be strong this quarter as supplies are tight. M/ c .N 1400 - -- --- 1 --- Shrimp prices fell from 1,485 ¢/kg to 1,473¢/ BlackTigerMGE kg this quarter. The decline was mostly due to an 1200 _____-__-__ -_-_-__ -_-…-_-_ average October price of 1,444¢/kg, but prices for Mexicanwhite 26/30 count rose 3.l1°o from this low 1000 .. ., I I . I to 1,488¢/kg in December. Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 W"hite spot disease reduced production exports Production (thousand tons) during the fourth quarter. Ecuador has seen its pro- 1200 duction decline by 25%, although exports are almost as high as last year, because shrimp were harvested 900 earlier and smaller. Over two-thirds of its exports are Frozen Shrimp, of small size shrimp and Ecuador has shifted to Asian Prawns: World markets who have a preference for the smaller size. 600 …---- ----------------- US imports of shrimp rose 7.20/D over the same January-November period of last year (NiTovember 300 US 1999, INAFS), and with lower imports from Ecua- ------------ dor and Central American countries, a scarcity of 0 , lat ard1 larger sizes and record levels of consumption in the 1976 1981 1986 1991 1996 US, Thailand, Me.xico, VTenezuela, Brazil, Vietnam and Imports (thousand tons) Bangladesh, have increased their exports to the US. 1200 Frozen Shrimp, Thailand has the greatest share of total US imports Prawns: World at 33.8%, an increase of 21.59 thousand tons or 900 ------------------ 26.7% over last year. Brazil and Venezuela have more than doubled their exports to the US from last year. 600 -_ ----------------- 1-larvests were lower in India, Australia, Indo- nesia, Sri Lanka and Iran this quarter due to weather- 300 - - -- related and environmental problems. In India, farmed 3Japan1 - .. -- .. - _ black tiger shrimp production was destroyed by the 0I . II . ..S . . typhoon in Orissa. These poor harvests contributed 1976 1981 1986 1991 1996 to higher prices inJapan. Tight Asian supplies, a build- up of inventories, a strengthening market and higher 2300 demand, have also pushed prices up. Prices should Constalt (1990() Forecast remain at current levels or increase slightly Consump- " tion also remains strong in Europe but supplies have 1 also been affected by the low Asian/Pacific and Ec- ; ' uadorian catches. There have also been smaller har- 1500 --- - --- - -- vests of cold wvater shrimp in Iceland and Canada, A / -: the latter's production reportedly down almost a third 1100- --------- and its sector having partly shifted into crabbing. Al- Current (Mexican No. 1') though Norway's landings have been good, up over 700 ... two-thirds from last year, with short supplies and 1975 1985 1995 2005 strong currencies, there has been a strong rise in prices in the EU and they should remain as high or edge Source: FAO, NMSF historial data, and World Bank forecasts. slightly higher 68 GLO]BAL COMMODITY MARKETS OTHER FOOD SHRIMP Other Developments * The US had restricted imports of wild shrmp from restriction on intertnaional trade." countries using methods which endangered sea turtles. * With increased and continued production losses due However, affected countries challenged the imposition to the white spot virus, shrimp farmers are searching and won the shimp-turde case on appeal by the WTO for successful health management techniques. One such Appellate Body. The WTO concluded tiat: "that NVTO technique adopted by farmers in Honduras, is to shift members may take measures relating to the conserva- the larvae hatching season to March-December and ton of exhaustible natural resources, including sea turdes. to reduce the larvae densitv in ponds from 25 to 7 However, these measures may not be applied in a way per square meter (m2), in order to reduce stress on that is arbitrary or unjustifiable or constitutes a disguised the shrimp (FIS Latin America). PRODUCTION TRADE 1994 1995 1996 1997 1994 1995 1996 1997 Production (000 tons) Exports (000 tons) US 153.0 148.8 143.5 152.2 Ecuador 72.0 86.4 85.7 109.0 India 107.9 101.8 128.4 134.0 India 110,5 98.5 110.7 105.4 Ecuador 72.7 84.9 85.7 109.0 Thailand 178.5 165.7 152.0 79.4 Thailand 191.0 165.7 152.0 79.4 Indonesia 83.8 76.6 79.6 77.6 Indonesia 88.7 78.2 79.6 77.6 Denmark 40.6 34.0 46.7 47.9 Vietnam 63.1 38.7 38.8 41.6 Vietnam 63.1 37.4 35.8 41.6 Mexico 45.9 51.6 44.1 41.4 Mexico 24.4 35.9 35.8 35.7 Greenland 35.0 33.0 34.7 30.8 Bangladesh 31.3 27.7 27.6 31.4 Bangladesh 22.1 26.3 26.5 25.7 Greenland 34.3 33.0 34.7 30.8 Spain 19.4 19.0 21.9 25.3 Canada 18.2 21.2 17.7 21.8 Pakistan 13.8 14.8 16.8 17.7 Pakistan 15.5 14.9 15.6 17.7 Iceland 31.2 35.1 38.7 15.6 Wbrid 1,050.4 978.0 1,013.2 n.a. Norway 25.0 16.1 17.8 15.2 Imports (000 tons) Colombia 12.7 11.0 9.8 13.8 Japan 303.5 293.1 289.0 267.6 Panama 9.2 12.2 12.2 13.6 US 263.1 245.2 230.3 259.5 Australia 11.1 14.9 10.8 13.5 Spain 108.2 80.5 82.7 77.0 China, PR 61.0 48.0 56.9 13.5 Denmark 49.9 40.4 53.1 52.8 Philippines 21.7 17.8 21.8 10.1 France 48.3 53.1 55.1 51.6 Korea, Rep 10.0 9.8 7.6 9.8 Canada 16.4 22.6 50.8 34.8 Mozambique 8.2 8.0 6.9 9.5 Italy 28.8 28.2 33.1 28.1 Myanmar ... 4.5 8.7 9.1 UK 27.8 26.6 25.1 25.9 Venezuela 4.7 5.2 7.0 8.6 HK, China 33.2 28.8 29.7 23.0 Taiwan, China 4.3 2.6 2.1 7.5 Belgium 19.7 22.2 21.2 20.7 World 1,143.3 1,060.7 1,063.7 n.a. World 1,068.9 1,003.3 1,033.5 n.a. Source: FAO Source: FAO GLOBAL SUMMARY Actual -Annual Growth Rate (/o)- World Balance (000 tons) 1980 1985 1990 1994 1995 1996 1976-80 1980-90 1990-96 Production 451.4 593.2 838.9 1143.3 1,060.7 1,063.7 2.17 7.56 3.33 Imports 361.9 524.1 905.5 1068.9 1,003.3 1,033.5 5.11 10.63 2.37 Actual Forecast Price (0Ikg) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Current 1,351.6 1,611.6 1,578.9 1,461.0 1,480.0 1,500.0 1,520.0 1,550.0 1,590.0 Constant 1990 1,183.6 1,487.0 1,515.4 1,410.0 1,394.0 1,379.0 1,362.0 1,297.0 1,177.0 Note: Producton, trade, exports, and imports are for the calendar year for frozen shnmp and prawns. Source: FAO, NMFS historical data, and World Bank forecasts. ja n u a ry 2000 69 AGRICULTURE Sugar Monthly Prices (f/kg) Sugar prices are expected to remain near 30 current levels for an extended period due to Free Market large global supplies and an imbalance 25 - ---------------------- between production potential and demand. A major cutback in supplies is needed before the 20 - - --------------------- market can return to balance, and history CSCE suggests this could take severalyears. 15-Futures 15 ------------~~~ -------- Sugar prices continue to trade in the narrow range 10 I. ... between 13 and 15 cents/kg as large production and Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 stocks exceed likely demand, but changes in near-term World Balance i(million tons) market conditions can send prices marginally higher or 150 lower. It seems unlikely that prices can sustain a rally Production beyond 15 cents unless a major itnporter such as Rus- 125 ns----------------------- sia increases buying. Global production is expected to -:- reach a new high in 1999/00 according to ISO esti- 100 - .r - mates while consumption and imports lag. Asian de- 0- -- Constipdon mand remains stagnant despite the improved economtic 75 -onsuiptio outlook for the region. Production has not yet begun to contract as major producers are either expanding 50 ..... production or hoping another producer will cut pro- 1970 1980 1990 2000 duction. Pressure from producers can also lead to government protection from low prices and this will 80Ending Stocks (million tons) delay even more the eventual price recovery. It will take more than trade reforms to solve the world sugar market's problems according to Tony 65 ------------------------- t Hannah, head of economics and statistics at the In- World ternational Sugar Organization (ISO), in an open out- 50 ------ ------- cry article in The Public Ledger (12/27/1999). Accord- ing to Hannah, previous predictions of higher sugar 35 ____ ------------------ prices which accompanied the start of the Uruguay Round did not consider the potential of low cost 20 producers such as Brazil and the history of the sugar 1970 1980 1990 2000 market to overproduce following every increase in Annual Prices (¢/kg) prices. Brazil is said to have a production cost of 4.5 180 to 5.0 cents/pound, while Australia and Thailand have $ Constant (1990) Forecast production costs around 9.0 cents/pound. These 135- -$------------------- countries could respond quickly if prices were to rise. t Competition from high fructose corn syrup (HFCS) 90 …-------------- further weakens the prospects that prices will rise to levels predicted by researchers from academia. The 45 sugar market faces three problems according to Current (FateMCukee) Hannah, weak Asian demand, low cost sugar substi- o ...,,,.., tutes such as HFC and the potential of Brazil to in- 1970 1980 1990 2000 2010 crease sugar production even at very low prices. Despite the problems, Hannah still supports trade S,arce. ISO reform. 70 GLOBAL COMMODITY MARKETS OTHER FOOD SUGAR Other Developments * Sugar producers, mostly from developing countries, duras, India, Nicaragua, Panama and Thailand. have formed an alliance to pressure the EU and US (Bloomberg Newx, 12/09/1999) According to Brian to reform their sugar policies. The newly formed Fisher, Executive Director of the Australian Bureau Globa/A//lance efr S.igar Trade Reform began their cam- of Agriculture and Natural Resources, world sugar paign at the World Trade Organization talks in Se- demand would rise and prices could increase by up attle. The alliance includes Australia, Brazil, Canada, to 40 percent if barriers to trade in sugar were re- Colombia, Costa Rica, El Salvador, Guatemala, Hon- moved. (Bloomber,g News, 11/30/1999) PRODUCTION AND CONSUMPTION TRADE 1996/97 1997/98 1998/99 1999/00 1996/97 1997/98 1998/99 1999/00 Production (000 tons) Exports (000 tons) Brazil 15,269 18,134 21,050 19,750 Brazil 5,995 8,483 11,205 10,450 EU 18,756 18,900 17,900 19,100 EU 5,064 6,158 4,930 6,325 India 13,898 13,859 16,780 17,400 Australia 4,415 4,514 4,142 4,322 China 7,323 8,747 9,702 8,900 Thailand 4,129 2,570 3,270 4,060 US 6,537 7,274 7,555 8,085 Cuba 3,597 2,569 3,030 3,245 Thailand 6,099 4,325 5,475 6,000 Guatemala 1,047 1,324 1,165 1,230 Mexico 4,822 5,492 5,025 5,475 S. Africa, Rep. 939 1,078 1,531 1,130 Australia 5,793 5,395 5,200 5,400 Mexico 742 1,137 605 975 Cuba 4,316 3,284 3,780 4,000 Colombia 808 849 875 850 Pakistan 2,460 3,800 3,775 3,575 Pakistan 0 519 525 275 World 123,698 127,501 133,949 135,160 World 35,410 36,647 38,650 38,881 Consumption (000 tons) Imports (000 tons) India 15,195 16,026 16,225 16,600 Russian Fed. 3,060 4,395 5,900 4,025 EU 14,605 14,100 14,300 14,600 EU 1,902 1,896 1,825 1,825 Brazil 8,800 9,150 9,200 9,300 Japan 1,726 1,660 1,610 1,630 US 8,838 8,923 9,140 9,300 Korea, Rep. 1,446 1,376 1,445 1,470 China 8,050 8,300 8,625 8,800 US 2,620 2,106 1,725 1,400 Russian Fed. 5,325 5,450 5,975 5,995 Canada 1,064 1,068 1,135 1,145 Mexico 4,140 4,416 4,420 4,500 Egypt 1,295 1,210 1,025 1,085 Pakistan 2,910 3,130 3,250 3,300 Iran, Islamic R. 1,390 1,075 1,050 1,075 Indonesia 3,280 2,930 3,000 3,025 Malaysia 1,122 1,010 1,225 990 Japan 2,478 2,530 2,500 2,525 Indonesia 1,690 1,080 1,410 975 World 122,231 125,199 128,140 130,395 World 35,425 36,631 38,419 33,890 Source: ISO Source: ISO GLOBAL SUMMARY Actual -Est.- -Annual Growth Rate r/o)- World Balance (mil. tons) 1970/71 1980/81 1990/91 1997/98 1998/99 1999/00 1970-80 1980-90 1990-98 Producton 72.9 83.9 110.7 127.5 133.9 135.2 2.43 1.72 2.12 Consumption 71.9 88.6 107.9 125.2 128.1 130.4 2.22 1.97 1.91 Ending Stocks 30.0 37.7 47.3 59.0 65.8 n.a. 5.02 1.49 2.75 Actual Forecast Price (¢/kg) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Current 26.4 25.1 19.7 13.8 14.0 14.2 14.5 22.0 25.0 Constant 1990 23.1 23.1 18.9 13.3 13.2 13.1 13.0 18.4 18.5 Note: Quantities are in marketng years (October/September), measured in raw value, except world ending stocks, which are in calendar years. Prices are in calendar years. Source: Historcal data from the International Sugar Organization and World Bank price forecasts. j a n u a ry 2000 71 AGRICULTURE Cotton Monthly Prices (¢/kg) The A Index dropped below 100J l/kg in 190 December for the first time since CotlookA Indlex September 1986. It appears that the 165 ------------------------ market has reached bottom and will pick up soon, as production cutbacks for the 140 V --_-_ NYCE next season are expected in virtually all Futures countries except the US. 115- 115 --- _----____-- ____ )_ _ The medium staple cotton price indicator 90 ... (Cotlook A Index) continued its slide reaching 97.4¢/ Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 kg in December, the lowcst lcvel sincc September World Balance (million tons) 1986. The index averaged 101¢/kg during the last 22 quarter of 1999, down 11.0% from the third quarter's Producuon average and 20.6% lower than the fourth quarter of 19- -- ----------- ----- last year. Recent estimates released by the International 16 ------- ----- ------- Cotton Advisory Committee (ICAC) indicate that oonsumption world cotton production for the 1999/00 season (Au- 13 - -- --- gust to July) will reach 19.30 million tons, 4% higher than last season's crop. Consumption will recover lo . .,,,I,, .,,,, ., I, from 19.05 to 19.28 million tons. Production in- 1970 1980 1990 2000 creases this season are expected to take place mainly( in Brazil (35%), US and Pakistan (22% each), and 12 Uzbekistan (16°.o), while China may reduce its out- put by as much as 13%. Exports will pick up from 9 5.27 million tons in 1998/99 to 5.97 million tons in 1999/00. W'ith production being almost equal to consump- 6 non in the current season and stocks remaining at the #,China high end of the spectrum, the market outlook is justi- 3 -l-,----- fiablv dominated by a bearish sentiment. The news - for the next season's crop gives a much more optirnis- 0 tic picture: apart from the US, all major producers are 1970 1980 1990 2000 expected to reduce output leading to a 3.5% produc- Annual Prices (¢/kg) tion cut-back while consumption is expected to in- 450 crease by almost 2% - a number of major imnporters C onstant (1990) Forecast are expected to increase consumption: Brazil (21%o), 350 - -- 0---… Japan (18%/o), and Mexico (37/o). This imbalance is : D 8 expected to lead to a 12% draw down in stocks, most 250 # " '* , of which is expected to come from China. We there- ' A fore expect prices to fluctuate around current levels 150…- -- - … for the first quarter and if next crop's estimates mate- Current \ rialize, prices could increase considerablv However, 50 ,,.,, l. ..... I........ .. because of the low current levels, this year's A Index 1970 1980 1990 2000 2010 average is expected to be close to the 1999 average (on calendar comparison). For 2001, we expect the A Source: ICAC, Cotton Outlook, and World Bank forecasts. Index to increase between 8% and 10%. 72 GLO1BAL COMMODITY MARKETS AGRICULTURAL RAW MATERIALS COTTON Other Developments * The US authorized the step-2 payment to cotton pro- down to 3.2 million tons in the 2000/01 season (it is ducers last October as part of the US $70 billion estimated at 3.5 mnillion tons), according to the Chi- agricultural appropriations bill for the fiscal year 2000. nese farm ministry as reported by Resiters on January USDA later announced that the support will be retro- 14. Many analysts believe that China's announcement active to the beginning of the fiscal year, October 1. signaled the turning point in the cotton market. WNhiile at the time of the announcement markets did * The EU has adopted a proposal which may reduce not move in any substantial way, expectations that the the amount of support that EU cotton producers re- support will run throughout the entire year may boost ceive if production exceeds a certain ceiling. If US output by 50/'o. adopted by the Council, the regulation will enter into C China announced that it xwill scale cotton production force bv September 1, 2000. PRODUCTION AND STOCKS TRADE 1997/98 1998/99 1999/00 2000/01 1997/98 1998/99 1999/00 2000/01 Production (000 tons) Exports (000 tons) US 4.092 3,030 3,700 3,900 US 1,695 915 1,400 1,750 China 4,600 4,501 3,900 3,500 Uzbekistan 950 900 950 1,009 India 2,450 2,710 2,800 2,750 West Africa 815 843 866 839 Pakistan 1,530 1,480 1,800 1,550 Australia 625 650 640 678 Uzbekistan 1,150 1,000 1,160 1,100 China 40 147 300 300 West Africa 956 897 928 901 Turkmenistan 58 210 230 298 Turkey 795 871 850 816 Greece 200 230 222 274 Australia 681 726 700 650 World 5,982 5,274 5,972 6,193 Brazil 370 420 569 580 Imports (000 tons) Greece 348 405 390 394 Indonesia 425 500 555 542 Turkmenistan 180 200 280 350 Mexico 330 302 390 533 Syrian Arab R. 355 335 325 254 Italy 350 330 365 381 World 20,015 18,551 19,298 18,620 Turkey 280 250 376 371 Ending Stocks (000 tons) Korea, Rep. 265 330 360 370 China 4,198 4,124 3,339 2,289 Brazil 380 292 284 344 India 811 1,011 1,217 1,217 Taiwan, China 275 293 322 310 US 844 849 979 1,034 Thailand 285 271 295 307 Pakistan 323 353 533 598 Japan 285 270 230 270 Turkey 100 269 437 413 India 180 136 300 251 Australia 326 424 432 382 Russia Fed. 223 179 224 227 World 9,825 9,699 9,702 8,696 World 5,725 5,429 5,972 6,193 Source: ICAC Source: ICAC GLOBAL SUMMARY Actual -Est. - -Annual Growth Rate elo)- World Balance (000 tons) 1970/71 1980/81 1990/91 1998/99 1999/00 2000/01 1970-80 1980-90 1990-98 Producton 11,740 13,832 18,970 18,551 19,298 18,620 1.23 3.05 0.13 Consumpton 12,173 14,215 18,576 19,046 19,282 19,565 1.09 3.17 -0.08 Exports 3,875 4,414 5,081 5,274 5,972 6,193 0.50 2.83 0.27 Ending Stocks 4,605 4,895 6,645 9,699 9,702 8,696 1.77 2.63 2.17 Yields (tonslhectare) 369 411 574 557 583 564 0.92 3.41 -0.55 Actual Forecast Price (¢lkg) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Current 177.3 174.8 144.5 117.1 118.0 130.1 132.3 158.8 180.8 Constant 1990 155.6 161.3 138.6 113.0 111.1 119.6 118.5 132.8 133.8 Note: Crop year begins August 1. Source: ICAC and Worid Bank. ja n u a ry 2000 73 AGRICULTURE Rubber Monthly Prices (,/kg) Following heavy rains in Malaysia and Indonesia, prices reached a high of 74.1 / f.o.b. Malaysia kg in November only to retreat to 65.4g/kg in 120 ------------------------- December. The market is expected to turn higher during 2000. 90 - -SICOM Futures The Kuala Lumpur rubber indicator price \ reached a high of 74.1¢/kg in November. Heavy 60 -_- __-_-__- -_-- rains in the Asian producing regions prevented farmers from tapping trees and created a short-term pro- 30 ,,, lE ., , I . ll . , tii tlittmttii,,,, duction shortfall. Although prices retreated to 65.40/ Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 kg in December, the fourth quarter's average of World Production (million tons) 68.1/kg was 22.3% higher than the third quarter but 11 still 3.6% lower than the same quarter of last year. Svnhdc / \ - According to the International Rubber Study 9 --------- ------. - Group's (IRSG) most recent estimates, the 1999 glo- bal output for natural and synthetic rubber reached 7 %,'_----------------------------- 6.68 and 10.28 million tons respectively. The corre- N# atural sponding figures for 2000 are expected to be 6.79 5------------------ -------- and 10.57 million tons, giving a combined growth of 2.4?'%, compared to 1999. Consumption of natu- 3, I ral rubber is expected to increase by 3.7% (from 6.78 1970 1980 1990 2000 million tons in 1999 to 7.03 million tons in 2000) while consumption of synthetic rubber is expected 30 World Ending Stocks (million tons) to increase by 2.2% (from 10.09 million in 1999 to 10.31 in 2000), giving a total combined increase of 2 2.8%. . ,f There are some indications, however, that the Svnthetic market is about to turn. First, the dermand-side fun- 2.0 -__-_--- ---------------- ---- damentals appear to improve considerablv. Most - - --- olfthe crisis-stricken Asian economies are getting back -5 ---------- on track, with regional GDP having grown an esti- Natural mated 5.5% in 1999 and expected to grow an addi- 1L0 I .... . . I * t * . . I I tional 6.2% in 2000. On the other hand, the effects 1970 1980 1990 2000 of the financial crisis in Russia and Brazil have been Annual Prices (/kg) less severe than originally anticipated. On the supply 220 side, govenutnent-induced production control mea- s I Conistant (199fQ sures in Thailand, along with market-induced shifting 170 ------------------------- from rubber to palm oil production, are expected to : ;: x: x tighten the rubber market. It is likely therefore that 120 "-I--… what started as a weather-related price spike in the end of 1999, may well continue into 2000, reflecting 70 - - _- V----,-- tlhe shift in the fundamenltals this time. Hence, we Current expect some recovery with the price forecast averag- I I ..l ll , t I . .. t 20 . . . ing about 70¢/kg in 2000, considerably higher than 1970 1980 1990 2000 2010 the 1999 average, but slightly below the 1998 aver- age. XX%e expect this recovery to continue in 2001, Soirce: IRSG and World Bank. with pnces increasing to 75¢/kg. 74 GLOBAL COMMODITY MARKETS AGRICULTURAL RAW MATERIALS RUBBER Other Developments * Record production, weak demand, and high stocks Organization's (INRO) stockpile according to The Pub- sent rubber prices to a 24-year record low last year. In lic Ledger. Following INRA III's termination last Oc- addition, the termination of INRA III made 1999 tober, INRO is in the process of disposing its 132,300 one of the most turbulent years in recent history for tons of rubber stocks used to manage its price band the rubber market. scheme. INRO has up to three years to liquidate the * China expressed an interest in purchasing 20,000 tons stockpile. Malaysia and Thailand have reportedly ex- of rubber from the International Natural Rubber pressed interest in buying the remaining INRO stocks. NATURAL RUBBER SYNTHETIC RUBBER 1995 1996 1997 1998 1995 1996 1997 1998 Production (000 tons) Production (000 tons) Thailand 1,970 2,033 2,216 2,025 US 2,486 2,589 2,610 2,358 Indonesia 1,527 1,505 1,714 1,688 Japan 1,520 1,592 1,520 1,546 Malaysia 1,083 971 886 827 China 553 600 589 683 India 540 580 591 557 Russian Fed. 775 725 621 676 China 430 444 450 458 Germany 548 555 619 646 Vietnam 189 201 219 232 France 583 595 606 620 C6te d'lvoire 90 108 109 114 Korea, Rep. 516 540 533 540 Sri Lanka 113 106 96 100 Taiwan, China 376 457 472 462 World 6,360 6,380 6,700 6,680 World 9,770 10,090 10,010 10,280 Consumption (000 tons) Consumption (000 tons) US 1,002 1,044 1,157 1,122 US 2,187 2,323 2,354 2,102 China 810 910 839 848 China 870 995 1,000 1,170 Japan 715 713 707 714 Japan 1,125 1,163 1,116 1,107 India 558 572 580 600 Germany 478 501 565 534 Germany 193 212 248 229 Russian Fed. 438 450 358 380 World 6,140 6,500 6,580 6,780 World 9,580 10,000 9,860 10,090 Net Exports (000 tons) Gross Exports (000 tons) Thailand 1,763 1,837 1,839 1,629 US 732 769 742 774 Indonesia 1,434 1,404 1,641 1,483 Japan 477 494 490 542 Malaysia 710 587 425 551 France 462 507 497 493 Vietnam 141 151 165 174 Germany 403 424 456 488 Liberia 30 67 75 90 Korea, Rep. 177 266 342 350 World 4,490 4,450 4,550 4,220 World 4,540 4,980 5,150 5,380 Source: IRSG and World Bank estmates for 1998. Source: IRSG and Worid Bank estmates for 1998. GLOBAL SUMMARY Actual -Est. - -Annual Growth Rate rl) - Natural Rubber (000 tons) 1970 1980 1990 1996 1997 1998 1970-80 1980-90 1990-98 Producton 3,140 3,820 5,080 6,380 6,700 6,680 1.77 3.19 2.91 Consumpbon 3,090 3,770 5,190 6,500 6,580 6,780 1.58 3.18 3.17 Net Exports 2,820 3,280 3,950 4,450 4,550 4,220 1.22 2.19 1.33 Ending Stocks 1,440 1,480 1,500 1,790 1,910 1,810 0.45 0.71 1.26 Synthetic Rubber (000 tons) Producton 5,880 8,640 9,840 10,090 10,010 10,280 3.45 0.63 0.22 Consumption 5,610 8,830 9,620 10,000 9,860 10,090 3.80 0.46 0.17 Net Exports 1,460 2,320 3,370 4,980 5,150 5,380 3.67 3.90 5.77 Ending Stocks 1,560 1,740 1,890 2,450 2,600 2,650 1.77 -1.41 5.41 Actual Forecast Prices-Natural (¢/kg) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Current 139.4 101.8 72.2 62.9 70.6 75.0 79.3 88.2 99.2 Constant 1990 122.3 93.9 69.3 60.7 66.5 68.9 71.1 73.8 73.4 Source: IRSG and Wodd Bank. ja n u a ry 2000 75 AGRICULTURE Tropical Timber Monthly Prices ($/cum) Tropical log prices are expected to remain firm 1000 in the near-term because of improved demand Sawnwood f.alaysia) prospects in Asia and Europe, and tight 775 ------- _________- ________________ supplies from major producers. Sawnwood prices may follow log prces higher, but could 550 -Pwo -set - -…-…----------------- suffer from domestic processing preference. X Asian timber prices edged higher during the 325 ------------- ----------- fourth quarter, xvith Malaysian log prices up 1.5% and Logs (Malaysia) sawnwood prices up 1.8%. This caps a sustained re- 100 I I ,,.,. I ,,.,,,,, ,, covery since the lows ofjuly 1998 following the Asian Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 cnsis. Prices are expected to continue firm as demand World Balance (million cum) recovers along with the recovery in the Asian econo- 360 trues and supplies remain tight during the rainy season Sawlogs) in southeast Asia which hampers logging. 270 _-_-_-_-_-_ --- _-_-_-_-_-_-_ African timber prices were up substantially dur- ing the fourth quarter due partly to the ban on 180 ________________-._______________ Cameroonian exports of specified endangered spe- cies of logs. Prices of Sapele logs increased 18% com- 90 Imports (Hardwood -Imports (Tropical * . l ~~~~~~~ ~~Sawlogss fIlardsvoodl Sawnlogsi pared to the third quarter whle sawnxvwood prices were w a Sws up 12%. The ban did not apply to Sapele logs, but its 0 * - - , exports are now subject to authorizations and quota 1970 1980 1990 2000 allocations. Sapele logs exported from neighboring People's Republic of Congo and Central African Re- 160 World Production (miRlion cum) public are still shipped through Cameroon's port. Re- duced supplies of endangered species logs and poor Sawn Hardwood 120 --- - - - - - - - - - - - - logging conditions due to heavy rains, contributed to - -- - - - higher prices for Sapele logs. African supplies are ex- pected to be slim at least through March 2000, ac- 80 __-__-__-__ -_-_-_-__ -_-_-_ cording to importers. _ Japan has been shifting its imports away from 40 - _-_-__-_-_ Asian tropical timber in an effort to diversify supplies amid concerns that logs from southeast Asia may be- 0 come scarce if environmental protection concerns in- 1970 1980 1990 2000 crease. This has led to recent Japanese efforts to in- Annual Prices ($/cum) crease the use of softwoods for plywood produc- 400 tion and imports from Russia and other sources. While Forecast Japan has traditionally been the largest importer of 300 - ------------ -------- Asian tropical hardwoods, China and Hong Kong have been taking up the slack left by lower imports to Ja- 200 - _- -L ± - ------- pan following the recent economic slump. The hous- 'y0 ing and furniture sectors have been the main engines / ------------- driving import growth, but China's imnports also in- Current creased after the government's July 1998 logging ban (Logs, Malaysia) following the severe floods in the upper reaches of 1970 1980 1990 2000 2010 Yangtze River. China's steady currency value in the face of widespread currency devaluation in the Asian Source: FAO, NIKKEI historical data, and World Bank forecasts. region provided additional capacity to import. 76 GLOEBAL COMMODITY MARKETS AGRICULTURAL RAW MATERIALS TROPICAL TIMBER Other Developments *The W`orld Bank is holding a crisis forestry semi'nar in 11Japan's demand for plywood is expected to remain jak-arta i-n early February to find solutions to deal with weak for at least the first quarter of 2000 due to large the accelerating deforestation in Indonesia. inventories. Japan's ply-wood imports for 2000 are *Effective January 1, 2000, Indonesia export duty on forecast to be 2.55 million cubic meters, wvith M\alaysia forest products is to be reduced to 150 from 200 in accounting for 1.3 mnillion cubic meters and other ori- order to promote economiuc recovery. gins accounting for .35 million cubic meters. Hardwood Logs (000 cum) Sawin Hardwood (000 cum) Plywvood (000 cum) 1997 1998 1997 1998 1997 1998 Prod. of Sawlogs & Veneer Production Production us 70,721 71,260 US 29,972 28,084 US 17,517 15,732 Brazil 26,000 25,000 India 14,960 14,960 Indonesia 9,600 7,015 Indonesia 32,250 21,444 Brazil 10,500 10,000 China* 8,097 4,978 China* 22,159 20,553 China* 8,195 7,295 Malaysia 4,447 3,904 Malaysia 29,700 20,000 Malaysia 7,176 5,091 Japan 4,257 3,267 India 15,812 15,812 Russian Fed. 3,925 3,560 Canada 1,830 1,750 World 313,131 293,372 World 116,754 106,425 Wobrld 55,968 46,419 Exports of Tropical Hardwood Exports Exports Malaysia 6,593 5,583 US 3,096 3,015 Indonesia 8,500 5,423 PNG 3,006 1,613 Malaysia 3,007 2,735 Malaysia 3,825 3,520 Gabon 3,000 1,600 Canada 1,022 1,183 US 1,596 858 Cameroon 1,706 1,280 HK, China 735 837 Canada 863 848 HK, China 548 742 Brazil 885 749 Russian Fed. 631 723 World 18,186 14,097 World 16,802 17,155 World 20,593 16,387 Imports of Tropical Hardwood Imports Imports China* 4,439 3,723 China* 2,607 2,377 Japan 5,422 3,938 Japan 5,854 3,427 Italy 1,760 2,021 China* 2,373 2,520 India 704 1,323 US 1,160 1,368 US 1,868 2,150 HK, China 843 914 Japan 1,789 1,060 HK, China 1,074 1,078 France 675 780 Spain 900 1,017 Germany 1,095 1,074 World 17,617 14,470 Word 21,066 20,929 World 19,522 18,608 Source: FAO Source: FAO Source: FAO GLOBAL SUMMARY Actual - Est. - -Annual Growth Rate elo) - World Production (mil. cum) 1970 1980 1990 1996 1997 1998 1970-80 1980-90 1990-98 Hardwood logs procl~ 210 262 300 315 313 293 1.49 1.65 0.73 Hardwood logs imports"* 36.1 42.2 25.1 16.7 17.6 14.5 0.07 -4.77 -6,81 Sawn hardwood prod. 98.5 115.8 131.8 120.6 116.8 106.4 1.17 1.74 -1.95 Sawn hardwood imports 7.1 13.2 16.1 19.1 21.1 20.9 4.97 2.50 3.67 Plywood producton 33.4 39.4 48.2 52.4 56.0 46.4 1.16 2.04 0.34 Plywood impoats 4.9 6.0 14.9 19.1 19.5 18.6 0.75 8.91 4.38 Actual Forecast Prices ($lcum) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Logs, current 252.1 238.3 162.4 187.1 215.0 225.0 235.0 255.0 290.0 Logs, constant 1990 220.8 219.8 155.9 180.7 202.5 206.8 210.5 213.4 214.7 Sawn hardwood, current 741.4 663.8 484.2 600.8 645.0 670.0 695.0 755.0 900.0 Sawn hardwood, constant 649.2 612.4 464.7 580.2 607.6 615.8 622.6 631.8 666.2 *Including Taiwan, China. *"Imports for 1970-89 and producton for all years refer to hardwood sawlogs and veneer logs. Imports from 1990 onwards are tropical hardwood sawlogs and veneer logs. Source: FAO, NIKKEI historical data, and Worid Bank esfimates and forecasts. Jan ua ry 2000 77 FERTILIZERS Nitrogen Monthly Prices ($/ton) Urea prices are expected to move higher 240 over the next several years because of recent production cuts, increased demand 195 ------------------------ and the possibility of policy changes in Urea key producing and consuming countries. 150 E. Europe Urea prices have made a modest recovery over - the last several months and now look ready to move higher. This appears to be a major turning point fol- lowing the long decline in prices since 1995. Bulk 60 prices, f.o.b. Eastern Europe, have risen from a low Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 of $63.25/ton in June to a high of $68.25/ton in World Balance (million tons) December. The industry is beginning to see plant 100 closures which bring production down in Europe Production and the United States in response to low fertilizer 80 __ ________ __ _-- prices. Demand is also starting to increase in Brazil, the rest of Latin America and Asia. 60 -------_ - - ------------------ One of the major factors contributing to the Consumption decline of nitrogen fertilizer prices during the last 40 - ---------- _______________ several years has been the increase in exports fromr Ukraine. Even though total nitrogen fertilizer pro- 20 . . . . . duction in Ukraine fell by half from 1988 to 1998, 1970 1980 1990 the shipments to the domestic market fell by almost World Trade (iniiion tons) 90% and this led to increased exports. These larger 30.0 exports contributed to the collapse of international prices from $210/ton in late 1995 to $63 in mid-1999. Now, this may change. The Ukrainian Ministry for 22.5 Agrcultural Complexes recently announced a tax cut Exports gn ~~~~~~~~~~~~~~~15.0 ------Iaot ------- and debt relief package to fertilizer producers as an emergency package to direct fertilizer back into the domestic market and alleviate a crisis in the agricul- 7.5 ---------------------- tural sector according to Fertiliter Week, 11/8/99. An even more important factor contributing to 0 the price decline over the last several years was 1970 1980 1990 China's decision to ban urea fertilizer imports in early Annual Prices ($/ton) 1997. China was the largestimporterin 1995, account- 800 ing for about 20 percent of world trade. The ban i, Constant (1990) Foreast was designed to promote domestic production and 600 - - ---------------------- achieve the longer term goal of nitrogen fertilizer self-sufficiency. However, this decision may now 400 --… '- - - - - - - - - - - - - - - -… - - I- -- need to be reconsidered since China plans to join the i- World Trade Organization and such policies may not 2 A --- :- be allowed. Given recent production cuts, improved de- -C0rrent (TSP mand prospects and possible policy changes, we are 1970 1980 1990 2000 2010 raising our medium term price forecast. Prices are expected to increase modestly in 2000 and then re- Soare. FAO. Feri/zer Week, and World Bank. turn to longer-term trend. 78 GLO]BAL COMMODITY MARKETS NITROGEN Other Developments * Potash Corporation of Saskatchewan (PCS) announced the shutdown, but it was likely an important consid- on December 31st that it was shutting two ammonia eration. Negotiations are reportedly underway to plants in Trinidad with a combined output of .93 mnil- agree to a new contract. Prices rose in early January lion tons per year following the expiration of the natu- following the announcement. ral gas supply contract between national Gas Com- * The US Department of Commerce imposed provi- panv of Trinidad and Tobago Lirmited and PCS Nitro- sional duties of 265%/o on Russian ammonium nitrate gen according to a PCS press release. The low inter- imports into the US on December 30th. A final deter- national prices were not mentioned as a reason for mination is due on MIarch 14, 2000. PRODUCTION AND CONSUMPTION TRADE 1994/95 1995/96 1996/97 1997/98 1994/95 1995/96 1996/97 1997/98 Production (000 tons) Exports (000 tons) China 16,689 18,633 21,042 20,538 Russian Fed. 2,814 3,661 3,646 3,122 US 14,017 14,244 15,226 15,372 US 2,902 2,997 2,989 3,038 India 7,944 8,769 8,593 10,083 Canada 1,955 2,179 2,090 1,878 Russian Fed. 4,027 4,713 4,900 4,293 Netherands 1,480 1,457 1,505 1,435 Canada 3,801 4,019 4,049 4,122 Ukraine 1,301 1,231 1,464 1,418 Indonesia 2,565 2,858 3,045 3,059 Indonesia 740 914 711 1,087 Ukraine 1,935 1,871 2,083 2,022 Bel-Lux 1,001 978 1,043 1,074 Netherlands 1,785 1,595 1,772 1,848 Saudi Arabia 911 788 845 806 Pakistan 1,547 1,693 1,682 1,661 Poland 457 637 520 590 Poland 1,269 1,469 1,549 1,545 Germany 630 831 676 561 World 82,746 86,004 90,973 90,092 World 22,433 25,157 24,894 23,957 Consumption (000 tons) Imports (000 tons) China 19,216 23,383 25,277 23,260 US 4,702 4,569 4,132 4,697 US 10,631 11,161 11,206 11,163 China 2,577 4,897 4,423 2,955 India 9,507 9,823 10,302 10,905 India 1,473 2,008 1,156 1,375 France 2,309 2,392 2,525 2,518 Germany 1,249 1,218 1,165 1,224 Pakistan 1,738 1,984 1,985 2,088 France 1,218 1,306 1,222 1,112 Indonesia 1,649 1,844 2,084 1,838 Vietnam 903 785 937 952 Germany 1,787 1,769 1,758 1,788 Italy 679 600 736 787 Canada 1,456 1,576 1,671 1,708 Thailand 687 780 811 779 Brazil 1,225 1,151 1,197 1,306 Brazil 494 426 495 686 UK 1,339 1,328 1,438 1,251 Australia 428 493 628 679 World 72,247 77,986 83,017 81,177 World 21,815 25,097 24,838 24,646 Source: FAO Source: FAO GLOBAL SUMMARY Actual -Annual Growth Rate elo) - World Balance (mil. tons) 1970/71 1980/81 1990/91 1995196 1996/97 1997/98 1970-80 1980-90 1990-96 Production 33.3 62.8 81.9 86.0 91.0 90.1 6.53 3.12 0.03 Consumption 31.8 60.8 77.2 78.0 83.0 81.2 6.86 2.60 -0.49 Exports 6.8 13.2 20.0 25.1 24.9 24.0 7.23 5.10 2.69 Actual Forecast Urea Prices ($/ton) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Current 187.5 127.9 103.1 77.8 90,0 100.0 110.0 120.0 140.0 Constant 1990 164.5 118.0 98.9 75.1 84.8 91.9 98.5 100.4 103.6 Note: Quantites are for total nitrogen fertilizer in marketing years and prices are for urea, bagged, spot, f.o.b. Eastem Europe in calendar years. Source: FAO and Wodd Bank. ja n u a ry 2000 79 FERTILIZERS Phosphates 260 Monthly Prices ($/ton) Phosphate fertilircer prices are expected DAP to stabili.Ze in 2000, after falling for more 220 -_- than ayear. Production cuts and plant ,X closings should bring the industry back into 1 balance. 180 - 140 --- - - - - - --- - - - - - - - - Phosphate fertilizer prices continued to fall in the fourth quarter, with DAP prices down 14.83%o 100 ....i......mll,.l.al i ......... I...........I compared to the third quarter and TSP prices down Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 7.0%. However, the industry also started to make the necessary production cuts to bring demand and World Balance (million tons) supply into balance, and prices began to firm in late December. IMC Global, a major US producer, Production announced in November that it would close plants 40 \ in Louisiana and Florida, bringing 1999 production cuts to 1.7 million tons according to industry 30 - _ , sources. Potash Corporation of Saskatchewan (PCS), g " the third largest phosphate producer, had previousiv 20 _-_-_-_-_-_-_-_-_-_-_-_-_-_-_ announced plant closures and shutdowns in its phos- phate and nitrogen operations in mid-August be- 10 .11..11..1 I . ..... I cause of weak market conditions. 1970 1980 1990 WX'eak demand has been a factor in recent price World Trade (million tons) declines, but demand now looks ready to increase. 20 Brazil's phosphate fertilizer imports were down one-third in the first 3 quarters of 1999 compared 15 i-----_-_-__-__-__ -_-_-_ to 1998 because of the economic crisis. However, Exports economic conditions in Brazil have improved and 10------- this should lead to a recoverv in phosphate imports. 0 ' Lmports Chinese imports totaled 3.5 million tons in the first - I _ I eight months of 1999 and imports in 2000 are ex- pected to remain near 1999 levels. Demand in In- 0 . . .l. I 11111, dia is expected to increase because of the recent 1970 1980 1990 damage to production facilities from the cvclone in Orissa province. 800 Annual Prices ($/ton) Phosphate rock prices for 2000, could come I ( Forecast under pressure because of lower DAP prices and Ct 1 600 -- - - - - - - - - - - - - - - - new production in Australia and Canada. The ex- 6 pected demand from Oswal Chemicals and Fertil- izers Ltd., in India will also be slower to develop 400 -- than expected because of the cyclone which hit the / region in late-October. When the Oswal facilitv is 200 - t- - - fully operational, it is expected to need 3.5 million Current (TSP) tons of phosphate rock per year. However, much 0........ I........ of this rock is expected to come from China which 1970 1980 1990 2000 2010 has surplus capacity. On balance, phosphate rock prices are expected to remain about the same as Source: FAO, FertiliZer Week, and Torld Bank. last year at $44/ton for Moroccan exports. 80 GLOBAL COMMODITY MARKETS PHOSPHATES Other Developments * The cyclone which hit Orissa province in India in late port which is 90 kilometers north of the cyclone's October disrupted phosphate production at India's path according to Fertilir.er Week, 11/8/99. second largest producer, Paradeep Phosphates Ltd. * US fertilizer exporters are lobbying the European fer- In addition, Oswal Chemicals and Fertilizers Ltd., tilizer industry to elirninate tariffs of 5-8% on phos- which was under construction and had not yet be- phate fertilizers imported from the US. The US ac- gun production, was also damaged by the cyclone. counts for 64% of world DAP exports, but only has a The cleanup and repair is expected to take as long as 2.4% market share in Europe according to the US four to six months. The bulk of India's phosphate exporters. fertilizer production capacity is located near Paradeep PRODUCTION AND CONSUMPTION TRADE 1994/95 1995/96 1996/97 1997/98 1994/95 1995/96 1996/97 1997/98 Production (000 tons) Exports (000 tons) US 11,055 10,500 10,900 10,765 US 6,335 5,838 5,679 5,716 China 5,045 6,091 5,822 6,482 Russian Fed. 1,397 1,525 1,130 1,294 India 2,587 2,626 2,615 3,090 Morocco 769 811 858 846 Russian Fed. 1,716 1,933 1,575 1,777 Tunisia 674 686 703 637 Brazil 1,429 1,265 1,305 1,353 Mexico 81 267 273 343 Morocco 894 936 979 921 Bel-Lux 194 270 282 333 France 667 668 682 687 Netherlands 459 390 285 320 Tunisia 721 741 790 673 Jordan 318 318 328 256 Spain 422 413 478 488 Norway 179 207 207 208 Mexico 373 427 433 469 Poland 91 175 135 197 World 32,808 33,847 34,020 34,925 World 12,329 12,568 11,994 12,146 Consumption (000 tons) Imports (000 tons) China 7,020 8,913 8,521 9,339 China 2,023 2,936 2,803 2,950 US 4,014 4,107 4,184 4,195 Australia 519 612 651 716 India 2,932 2,898 2,977 3,917 India 376 686 219 707 Brazil 1,931 1,575 1,705 1,943 Brazil 517 341 446 703 France 1,030 1,032 1,052 1,120 France 600 568 561 568 Australia 923 965 985 1,100 Italy 500 538 524 508 Canada 628 658 704 705 Pakistan 283 272 381 416 Japan 703 631 611 594 Thailand 379 453 436 380 Turkey 444 580 578 592 UK 377 349 343 345 Pakistan 429 494 419 551 Canada 286 292 377 343 World 29,271 30,908 31,428 33,466 World 10,543 11,738 12,005 12,629 Source: FAO Source: FAO GLOBAL SUMMARY Actual -Annual Growth Rate (%) - World Balance (mil. tons) 1970/71 1980/81 1990/91 1995196 1996/97 1997/98 1970-80 1980-90 1990-96 Production 22.0 34.5 39.0 33.8 34.0 34.9 3.72 1.70 -3.57 Consumption 21.1 31.7 36.3 30.9 31.4 33.5 3.85 1.39 -3.87 Exports 2.9 7.5 10.7 12.6 12.0 12.1 8.37 5.01 1.57 Actual Forecast TSP Prices ($1ton) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Current 175.8 171.9 173.1 154.5 145.0 150.0 155.0 160.0 170.0 Constant 1990 154.3 158.6 166.1 149.2 136.6 137.9 138.9 133.9 125.8 Note: Quantities are for total phosphate fertilizer in marketing years and prices are for TSP, bulk, spot, fo.b. US Gulf in calendar years. Source: FAO and World Bank. ja n u a ry 2000 81 FERTILIZERS Potash Monthly Prices ($/ton) Potash prices remained steady in 1999, as 140 producers cut production to offset weak demand. Early contract agreements 130 _________________________________ suggest prices in 2000 will remain about Potassium unchanged from 1999, while sales will 120 _________________ - increase. Prices for muriate of potash (NIOP), remained 110 at $122.5/ton, f.o.b. Vancouver from the second quar- ter onwards. Weak demand in Europe and the US 100 I,,,, . ,, , l ,,,,,, .,, l kept potash fertilizers sales slow in 1999, but major Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 producers were able to cut supplies enough to keep World Balance (million tons) inventories from r'sing to burdensome levels and 40 likely ended 1999 with smaller inventories than at Production the start of the year. Canadian producers saw de- 30 ----------------- ---------- mand drop 12% from July to September while US . - - producers faced a 13% decline in demand during 20 _ the same period according to FertiliZer Week. IMC consumption Global, a major US fertilizer producer, announced 10 on November 1", an extended shutdown schedule for three mines in Saskatchewan Cananda, as part of 0 . . . . . . .,,, . an ongoing program to balance global supply and 0 1 demand according to FERTECON's World FertiliZer 1970 1980 1990 Review (12/99). Against this backdrop, attempts to World Trade (million tons) increase prices in the second half of 1999 were re- jected by buyers. Brazilian imports of muriate of potash 20 Exports (MOP) fell 16% in the first 10 months of 1999 o [mports compared to the same period of 1998. However, 15 ------------------ potash imports recently got support from a larger than expected Chinese import quota of 6 million 10 tons for MOP for 2000. The announcement, made in late December, was nearly double the 3.3 mil- 5 , . . . .I. . . lion tons imported in 1997/98 (see table opposite 1970 1980 1990 page) and is about 25% higher than 1999 imports Annual Prices ($/ton) according to industry sources. This continues the 200 recent trend in China of increasing the applications , Constant (1990) Forecast for potash and phosphate fertilizers in order to bet- 150 ---- ---- ______-___ ter balance the NPK ratio. The global potash in- ' dustry may be in for more good news if China 100 hopes to join the WTO and continue expanding its potash use. China does not have an abundance of -- - - - low cost water-soluble potash deposits and its de- 50 sire to join the WTO will likely preclude the indus- Current try protection necessary to develop its higher cost 0 water-insoluble reserves. Therefore, China appears 1970 1980 1990 2000 2010 likely to be a major importer of potash for the Source: FAO, Fern'iler Week, and World Bank. foreseeable future. 82 GLOBAL COMMODITY MARKETS POTASH Other Developments * Potash Corporation of Saskatchewan announced in percent of its potash product. end-December that Canpotex, the offshore sales The European Commission (EC) has completed agency for Saskatchewan potash producers, has con- its investigation of the current antidumping mea- cluded contracts with major Chinese customers. The sures in place for imports of potash into the EU contracts should result in shipments to China dunrng from Russia, Belarus and the Ukraine in Novem- the first half of 2000 equal to or slightly higher than ber according to FERTECON's World Fertilizer Re- the 1.6 million tons sold to China in all of 1999. The view (12/99). The EC has not yet made its findings contracts were completed at prices unchanged from public, but has reportedly disclosed them to inter- the previous year. PCS supplies Canpotex with 56 ested parties. PRODUCTION AND CONSUMPTION TRADE 1994Y95 1995/96 1996/97 1997/98 1994/95 1995/96 1996/97 1997/98 Production (000 tons) Exports (000 tons) Canada 9,060 8,065 8,151 9,029 Canada 8,216 7,851 8,077 9,015 Germany 3,286 3,278 3,334 3,423 Germany 2,802 2,446 2,549 2,838 Russian Fed. 2,493 2,814 2,618 3,403 Russian Fed. 2,027 2,317 1,947 2,830 Belarus 2,510 2,789 2,716 3,247 Belarus 1,917 2,189 1,978 2,506 Israel 1,260 1,326 1,500 1,488 Israel 1,327 1,286 1,203 1,632 US 827 843 834 883 Jordan 910 1,058 1,052 861 Jordan 930 1,068 1,059 849 US 538 523 597 846 France 870 802 751 665 France 596 538 538 588 Spain 684 637 681 639 Spain 410 489 470 498 UK 580 582 618 565 UK 385 374 371 373 Worid 23,077 22,767 22,876 24,947 Ubrld 20,348 20,634 20,128 23,370 Consumption (000 tons) Imports (000 tons) US 4,652 4,770 4,921 4,847 US 4,759 5,181 5,073 5,784 China 2,444 2,887 2,337 3,390 China 2,261 2,870 2,258 3,291 Brazil 1,866 1,791 1,941 2,242 Brazil 1,643 1,539 1,826 2,132 France 1,373 1,491 1,488 1,434 India 1,282 1,424 667 1,437 India 1,125 1,156 1,030 1,373 France 1,274 1,230 1,341 1,418 Malaysia 700 603 646 670 Malaysia 708 660 631 701 Germany 668 652 646 659 Poland 386 456 502 509 Spain 417 415 451 479 Italy 439 461 440 447 UK 475 473 485 450 Japan 485 490 439 431 Belarus 300 250 422 425 Korea, Rep. 333 353 417 407 Urid 20,084 20,690 20,675 22,611 M2Ird 19,906 20,472 19,717 23,043 Source: FAO Source: FAO GLOBAL SUMMARY Actual -Annual Growth Rate (/o) - Ubrld Balance (mil. tons) 1970/71 1980181 1990/91 1995196 1996/97 1997/98 1970-80 1980-90 1990-96 Producton 17.6 27.5 26.7 22.8 22.9 24.9 3.97 -0.03 -4.47 Consumption 16.4 24.2 24.5 20.7 20.7 22.6 3.93 0.05 -4.82 Exports 9.5 16.7 18.1 20.6 20.1 23.4 4.89 0.73 2.06 Actual Forecast MOP Prices ($1ton) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Current 116.9 116.5 116.9 121.6 122.5 124.0 124.0 125.0 127.0 Constant 1990 102.6 107.5 112.2 117.5 115.4 114.0 111.1 104.6 94.0 Note: Quantities are for total potash fertilizer in marketng years and prices are for potassium chlorde, also known as muriate of potash (MOP), f.o.b. Vancouver, in calendar years. Source: FAO and Wodd Bank. ja n u a ry 2000 83 METALS AND MINERALS Aluminum Monthly Prices ($/ton) Prices rally on expectations of rising 1750 demand and an extremely tight alumina LME Cash eee@@@@e market. Aluminum prices are expected to 1600 A - LME rise moderately in 2000 as the market Futures surplus is reduced. 1450 -_ -- --------- Aluminum prices continue to rise, up 4% in the quarter, due to expectations of improved demand, 1300 - - - a modest reduction of inventories, and potential sup- ply problems because of a tight alunlina market. 1150 III Prices stabilized through much of the quarter before Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 surging in December to end the year at $1625/ton - World Balance (million tons) up 37% from March and the highest level in more 24 than 2 years. Prices could rally further but stocks RefinedAlu Production remain high and the market is expected to remain in 20 ---------------------------- surplus this year and next. Consequently higher prices could attract forward producer selling and reactiva- 16 ---- - - ----- tion of idle capacity. '. '- LMiE stocks declined gradually during the quar- 12 - --------------------------- ter, ending the year at 775 thousand tons, down 2.7% Consumption from end-September. However, inventories are still 8 . . . . . I , I I I ' . .- relatively large, and unreported stocks may have risen 1970 1980 1990 2000 last vear. The alumina market continues to tighten fol- Ending Stocks (thousand tons) lowing the explosion at Kaiser's Gramercy plant in 3000 June. It is unlikely that the plant will be reactivated A in mid-year as the company has stated, and substan- 2250 tial production may not resume until next year. The market will remain in deficit this year but is expected 1500 ----------- to return to surplus in 2001. China is heavily reliant on alumina imports and is the most affected by lim- 750 -- ----- - - - ited supplies and higher prices. 4Q99 Demand for refined aluminum remains strong o . ., . . . . in the US and is expanding in Europe, whileJapanese 1970 1980 1990 2000 demand is beginning to recover - but mainly for ex- Annual Prices ($/ton) ports. Elsewhere is Asia, demand is very strong, 3000 oecast particularly in the Republic of Korea, due to the Constant (1990) revival of trade in manufactured products. How- 2250- ------ ---------- ever, part of the strong growth this past year was ;'\ , Ot ' , due to restocking. 1500 - -¾' -- -- - The market surplus is expected to be reduced this year and prices are expected to increase moder- 750… ately. But this will depend critically on the pace of Current demand, especially in Asia. US economic activity is 0 ,* ;, * , 1 *r expected to slow and will affect aluminum consump- 1970 1980 1990 2000 2010 tion in the constructon, manufactuting, and auto sec- tors. Still, world demand is expected to increase by Source: LME. WBMS, and World Bank forecasts. more than 4%, with production increasing by 3.5%. 84 GLO13AL COMMODITY MARKETS ALUMINUM Other Developments * Alcan Global Automotive Products, an affiliate of gallon without compromising passenger needs. Alcan Aluminum, has assisted Ford in creating a fuel- * All 240 pots at Dubai Aluminum's 140 thousand tons efficient, family size car that achieves more than 70 per year (kt/y) Condor expansion were energizcd in miles per gallon. The Prodigy, an aluminum-struc- October. The Jebel Ali smelter which produced 400 tured hybrid electric vehicle, uses Alcan's unibody kt in 1998 will operate at its fully expanded capacity technology which leads to a vehicle structure that of 536 kt/y in 2000. weighs just310 lb, a 50%weight saving. Curbweight * Forthe first 11 months of 1999, worldprimary alumi- is 2,387 lb, some 1,000 lb lighter than a typical sedan. num production totaled 18,856 kt, an increase of 3.4% Prodigy is part of Ford's initiative in the Partnership or 628 kt over the same period a year earlier, accord- for a New Generation of Vehicles program, a col- ing to IPAI. All main regions recorded gains but most laboration between automakers, the US government of the increase occurred in the Eastern Hemisphere and other organizations aimed at producing a proto- - Western Europe 163kt; Eastern and Central Europe type family car that can achieve up to 80 miles per 149 kt; Asia 102 kt; and Oceania 89 kt. PRODUCTION OF REFINED ALUMINUM (000 TONS) CONSUMPTION OF REFINED ALUMINUM (000 TONS) 1995 1996 1997 1998 1995 1996 1997 1998 US 3,375 3,577 3,603 3,713 US 5,055 5,348 5,390 5,814 Russian Fed. 2,724 2,874 2,906 3,005 China 1,942 2,135 2,260 2,425 China 1,676 1,771 2,035 2,336 Japan 2,336 2,393 2,434 2,080 Canada 2,172 2,283 2,327 2,374 Gerrnany 1,491 1,355 1,558 1,518 Australia 1,293 1,370 1,490 1,626 Canada 612 620 628 734 Brazil 1,188 1,197 1,189 1,208 France 744 672 724 687 Norway 847 862 919 996 Italy 665 585 654 675 S. Afrnca, Rep. 233 617 683 693 UK 620 600 619 668 Germany 575 577 572 612 India 581 565 553 567 Venezuela 627 635 641 584 Brazil 501 497 479 521 India 537 531 547 542 Korea, Rep. 675 674 666 506 Bahrain 454 461 490 501 Russian Fed. 476 444 469 489 UAE 247 259 378 387 Spain 350 360 430 435 Spain 362 362 360 360 Belgium 336 331 345 396 New Zealand 273 285 310 318 Australia 343 321 352 367 Netherands 216 227 232 264 Taiwan, China 363 310 374 301 UK 238 240 248 258 Greece 163 156 204 213 Indonesia 228 223 219 133 Turkey 144 136 161 181 Tajikistan 230 198 189 196 Venezuela 183 207 193 180 Other 2,173 2,287 2,454 2,416 Other 2,894 2,898 3,261 3,037 Uorld 19,668 20,836 21,799 22,607 World 20,473 20,627 21,756 21,793 Source: WBMS Source: WBMS GLOBAL SUMMARY Actual -Annual Growth Rate (/) - World Balance (000 tons) 1970 1980 1990 1996 1997 1998 1970-80 1980-90 1990-98 Production 10,257 16,027 19,362 20,836 21,799 22,607 3.13 2.02 2.28 Consumptbon 9,996 14,771 19,244 20,627 21,756 21,793 3.13 1.95 2.11 LME Ending Stocks 0 68 311 951 622 636 n.a. -0.32 -1.51 Actual Forecast Price ($1ton) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Current 1,506 1,599 1,357 1,361 1,550 1,600 1,650 1,800 1,900 Constant 1990 1,318 1,476 1,303 1,314 1,460 1,471 1,478 1,506 1,406 Source: WBMS and LME data, and World Bank forecasts. ja n u a ry 2000 85 METALS AND MINERALS Copper Monthly Prices ($/ton) Prices are expected to rise due to growing 2800 demand and reduced markeet surplus. LME Cash However, further gains could be capped by 2400 r-X-LME producer selling and reactivation of idle Futures capacity. 2000 - Copper prices continued to rally in the fourth 1600 - -------- quarter, rising 3.5%, on expectations of rising de- mand and diminishing surplus of supply. Prices con- 1200 solidated in early December, but then surged to end Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 the year at near $1850/ton, up 35% from March. World Balance (million tons) Continued improvement in global economic activitv 15 could help take prices higher, but price rises could beRefined Copper Production capped by forward producer selling and reactiva- 13 -- tion of idle capacity. Inventories remain high with LME stocks end- 11-- ing the year at 790,000 tons, marginally below all - time highs. In addition there is believed to be large 9 ---------------- tonnage of unreported stocks held off warrant. Demand remains strong in the lUS, with the 7 . I C .onsumpton auto and construction sectors providing much of 1970 1980 1990 2000 the increase. In some parts of Europe growth has also been strong in these sectors, and there are ex- 800 Ending Stocks (thousand tons) pectations of a more broad-based recovery this year. 800 Demand is slowly recovering in Japan, mainly due to 4Q99 higher exports, and the Republic of KIorea is enjoy- 600- ing a stellar rebound in both exports and domestic demand. Part of the increase in copper consump- 400 tion last year was due to large-scale restocking in Asia and, as a result, the rate of growth is expected to 200 slow this year. Significant new capacity is coming on-stream 0 in a number of the main producing countries, e.g., 1970 1980 1990 2000 Chile, Indonesia and Australia. Nevertheless, growth Annual Prices ($/ton) in demand is expected to outstrip increases in supply 6000 ; X this year, resulting in a diminished market surplus. r^Constant (1990) Fot If global economic growth steams ahead and 4500 ,- ' ----------------- inventories fall, prices could rise sharply this year. However, should stocks remain high there could be 3000 - - - ----- resistance to further gains by forward producer sell- \ -- ing. While production cutbacks have helped improve 1500 - the market balance, higher prices could reactivate idle Current capacity and increase the availability of scrap mate- o 0 ,. . ...... rial, the latter of which has already started to appear. 1970 1980 1990 2000 2010 Longer term, average prices are expected to rise moderately, but the path will continue to be volatile Sonrce: LME, WBMS, and World Bank forecasts. and cyclical. 86 GLOBAL COMMODITY MARKETS COPPER Other Developments * Canada's Fitst Quantum M'inerals and Switzerland's duction. ZCI will take a 60% stake in the new hold- Glencore International agreed in early January to pur- ing company - Iionkola Copper Mines - with ZCCM chase a 90% stake in Zambia's Nkana and Mulfuira taking 20%, IFC 10%/o, and an international financial copper mines from parastatal Zambian Consolidated institution 10%. ZCCM will receivre $90 million for Copper Mines (ZCCMI) for $43 million. The corn- the assets, and ZCI will sell its 27.3% interest in ZCCM panies agreed to invest $154 million over the next 3 to the government for $13 million. Anglo has a 50.1%h years to boost output. share in ZCI which takes its share of the Zambia's * Anglo American, through its subsidiary ZCI, signed copper industry to 30%. an agreement with the Zambian government and * Chilean copper production in the first 11 months of ZCCM in December to acquire majority stakes in the 1999 rose 19.5% to 4.02 mt. Chile's National Mining Nchanga, Konkola and Nampundwe mines, which Society expects the country's production to nrse by account for more than 2/3 of ZCCM's copper pro- 3/o in 2000 to 4.4 mt. PRODUCTION OF REFINED COPPER (000 TONS) CONSUMPTION OF REFINED COPPER (000 TONS) 1995 1996 1997 1998 1995 1996 1997 1998 US 2,280 2,347 2,450 2,460 US 2,534 2,621 2,790 2,883 Chile 1,492 1,748 2,117 2,335 China 1,143 1,193 1,270 1,397 Japan 1,188 1,251 1,279 1,277 Japan 1,415 1,480 1,441 1,255 China 1,080 1,119 1,179 1,211 Genrany 1,066 960 1,039 1,138 Germany 616 671 674 696 Italy 498 504 521 590 Russian Fed. 560 599 640 656 Taiwan, China 563 544 588 584 Canada 573 559 561 563 France 540 518 558 583 Poland 406 425 441 447 Korea, Rep. 540 598 621 560 Mexico 208 246 297 445 UK 398 396 408 374 Peru 282 342 384 411 Mexico 172 192 252 341 Korea, Rep. 233 246 265 369 Belgium 362 332 329 324 Belgium 376 386 373 368 Brazil 198 233 258 301 Kazakhstan 256 267 301 325 Poland 213 226 230 266 Zambia 314 317 328 306 Canada 190 218 225 246 Spain 164 264 292 304 Spain 175 191 203 235 Australia 266 311 271 285 Turkey 139 160 188 208 Brazil 165 172 172 167 India 116 140 160 200 Phillippines 158 156 147 152 Sweden 143 144 158 167 India 40 39 66 134 Russian Fed. 187 165 165 165 Other 1,157 1,267 1,362 1,236 Other 1,561 1,587 1,618 1,577 Worid 11,813 12,732 13,592 14,147 Ubrld 12,152 12,401 13,021 13,394 Source: WBMS Source: WBMS GLOBAL SUMMARY Actual - Annual Growth Rate (0/o) - World Balance (000 tons) 1970 1980 1990 1996 1997 1998 1970-80 1980-90 1990-98 Production 7,583 9,242 10,809 12,732 13,592 14,147 1.95 1.14 3.33 Consumption 7,294 9,400 10,780 12,401 13,021 13,394 2.43 1.07 2.86 LME Ending Stocks 72 123 179 125 338 592 7.51 -5.95 3.69 Actual Forecast Price ($/ton) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Current 2,295 2,277 1,654 1,573 1,800 1,900 2,000 2,200 2,400 Constant 1990 2,010 2,101 1,587 1,519 1,696 1,746 1,792 1,841 1,777 Source: WBMS and LME data, and Wodd Bank forecasts. ja n u a ry 2000 87 METALS AND MINERALS Gold Monthly Priices ($/toz) Prices fall back under $300/tog on 400 renewed expectations of weak Spot fundamentals, notably continued central 360 -------------------------- bank sales and forward selling by producers. Higher prices will also impact 320 - COMEX price-sensitive consumers. Futures \E/E~~~~~~ l\ *-0 Gold prices fell 3.4% in the fourth quarter, but 280 - -------- experienced volatile movements following the an- nouncement in late September that 15 European cen- 240 tral banks will limit gold sales to 2000 tons over the Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 next 5 years. Prices shot up $85 to $340/toz in early Production (tons) October, but then settled back under $280 and ended 2400 the year at $290/toz. World Short covering by hedgers and speculators ex- 1800 - -- ---------- acerbated the price spike, but once the buying pres- sure subsided prices quickly settled back, as under- 1200 ---------------- lying market fundamentals had not materially - changed. Central bank sales will continue, as wi 600- forward selling by producers, and high prices will Soutl Africa - - dampen the demand of price-sensitive consumers. 0 j . . . I. . .. . . I, . . Consequently, prices are expected to remain under 1970 1980 1990 2000 $300/toz into the foreseeable future. In December the Netherlands' central bank Demand in Main Countries (tons) announced plans to sell 300 tons of gold over the next five years, but will not dispose of it by auction Developing but instead sell quietly into the market. The de- 550 clared sales by the Dutch, along with planned sales \ / by Switzerland (1,300 tons) and the UK (365 tons), 400- total 1965 tons, almost the entire quota set by the 15 V Developed European central banks. 250 ------- -- -------------- --------- On November 29 the UK government held its - third gold auction, selling a further 25 tons at $293.50, 100 . , , which was $0.40 cents below the spot price. Bids 3Q96 3Q97 3Q98 3Q99 were 2.1 times the allotted volume, well below those Annual Prices ($/toz) of the September auction which was oversubscribed 1000 more than 8 times. Constant (1990) Forecast Gold demand in the 27 key markets rose 22% 750 ------- r' ------------------ - in the third quarter year-on-year, and was the highest " 3-month level of demand on record, according to 500 ----- -% --- - - the World Gold Council. Much of the growth was ' in Asia, where demand was up 29%. In the largest 250 ---- ----- gold consuming country, India, demand rose 38%, Currcnt and there were particularly high rates of growth in O , Current I I....... Egypt and Turkey. Demand in the six main OECD 1970 1980 1990 2000 2010 markets was up a rather sluggish 5%. With the rise 91 ~~~~~~~~~Source: Plants Metals Week, WBMS, World Gold Council, and in prices, it is expected that demand in the fourth World Bank forecasts. quarter will be weaker in the developing countries. 88 GLOBALCOMMODITYMARKETS GOLD MINE PRODUCTION (tons) CONSUMPTION IN MAIN MARKETS (tons) 1995 1996 1997 1998 1995 1996 1997* 1998 S. Africa, Rep. 522.4 494,6 492.5 473.8 India 477.2 507.8 736.7 815.0 US 316.9 326.2 362.3 366.0 US 314.7 331.7 362.0 428.4 Australia 253.5 289.5 311.0 309.3 Saudi Arabia 223.9 210.7 213.8 191.6 Canada 150.9 166.4 171.4 165.9 China 139.4 153.0 202.0 172.0 China 136.4 120.6 149.6 158.2 Turkey 193.1 184.9 199.0 208.4 Indonesia 63.3 83.6 90.0 124.0 Indonesia 160.2 123.3 142.1 91.2 Russian Fed. 127.8 119.9 123.9 113.1 Korea, Rep. 121.0 125.5 114.4 -162.5 Peru 56.5 65.1 74.3 93.8 Thailand 110.0 105.3 110.8 112.2 Uzbekistan 63.6 71.0 82.0 82.0 Italy 272.1 152.2 107.1 110.4 Brazil 64.4 60.0 58.5 65.0 Japan 67.0 75.7 97.6 104.4 Ghana 53.1 49.3 54.7 63.1 Egypt 119.0 129.0 92.5 -40.0 PNG 51.7 51.6 48.5 60.3 Pakistan 43.2 53.7 81.8 98.2 Chile 44.2 51.8 47.8 43.8 Taiwan, China 88.6 73.1 74.0 70.2 Mexico 19.9 23.1 26.4 25.4 UAE 39.2 52.6 71.6 79.4 Zimbabwe 24.0 24.7 24.3 25.2 Germany 46.2 47.1 58.8 66.8 Kyrgyzstan 4.0 4.1 15.6 20.1 UK 54.0 59.0 58.0 64.0 Kazakhstan 10.9 10.2 9.7 18.0 Brazil 43.2 40.4 51.0 31.8 Colombia 22.1 21.5 16.2 14.8 France 50.4 47.5 49.4 59.4 Guyana 9.0 12.0 13.6 14.6 Mexico 31.0 41.0 49.0 55.0 Bolivia 14.4 12.6 13.3 14.4 Vietnam 36.0 41.0 45.0 44.0 Philippines 12.8 8.1 11.2 8.7 Kuwait 35.1 34.7 35.4 33.0 Japan 9.2 8.6 8.4 8.6 HK, China 29.6 33.6 30.1 14.4 New Zealand 12.1 11.5 11.4 7.7 Oman 24.1 20.0 22.4 14.1 Mongolia 4.5 4.9 8.5 7.3 Malaysia 16.5 16.5 17.8 15.3 Venezuela 10.0 11.7 22.3 6.8 Singapore 116.0 106.0 14.0 19.0 World 2,107.8 2,155.7 2,303.4 2,355.8 World 2,864.5 2,779.5 3,053.6 2,712.1 Source: WBMS Source: Wodd Gold Council *Ranked for 1997. GLOBAL SUMMARY Actual - % p.a.- World Balance (tons) 1991 1992 1993 1994 1995 1996 1997 1998 1998-91 Jewelry 2,358 2,760 2,553 2,618 2,791 2,850 3,342 3,145 4.2 Other Fabricaton 518 446 488 457 503 486 563 564 1.2 Bar Hoarding 252 282 162 231 306 182 323 155 -6.7 Other 30 239 6 260 n.a. Total Demand 3,128 3,518 3,442 3,305 3,606 3,518 4,228 4,123 4.0 Mine Production 2,159 2,234 2,287 2,279 2,274 2,357 2,480 2,555 2.4 Net Official Sales 111 622 464 81 173 275 376 412 20.6 Old Gold Scrap 482 488 576 617 625 641 629 1,098 12.5 Net Hedging 66 174 116 163 535 125 472 58 -1.8 Other 310 173 119 271 n.a. Total Supply 3,128 3,518 3,442 3,305 3,606 3,518 4,228 4,123 4.0 Actual Forecast Price ($1toz) 1996 1997 1998 1999 2000 2001 2002 2005 2010 Current 388 331 294 279 285 280 275 275 300 Constant 1990 _ 388 305 282 269 268 257 246 230 222 Source: Gold Fields Minerals Services and LME data, and Word Bank forecasts. ja n a ry 2000 89 METALS AND MINERALS Iron Ore and Steel Monthly Prices (¢/dmtu) Steel prices increase for products that have 34 been under anti-dumping actions, and growing global demand is expected to result 32 ---------------------------------- in much higher prices this year. Iron ore Iron Ore Contract markets are also strengthening from rising 30 steel production. The iron ore market picked up in the second 28 _ ----- half of the year due to econorirc recovery in Asia and rebound in global steel production. Price negotiations 26 , I i*iii Il.i. tl are underway between producers and major consum- Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 ers in Japan and Europe, and producers would like to Iron Ore (million tons) re-capture the I 1% drop last year. Given the expected 1200 upturn in stecl demand, produccrs may achicve a price increase of about 5%. WXThile Japanese steel exports 900 - _ __ have risen, domestic demand remains weak, and buy- Production ers xviii attempt to roll-over prices. 600 --------------------------------- The index of steel prices increased 3.11 ini the , - fourth quarter, and was up 15% from the lows in Feb- 300 ---- ruary. However, the price increases have been very Exports uneven. Prices have been significantly stronger for I . products in which western counaies have put up ef- 1970 1980 1990 2000 fective barriers with anti-dumping actions. HR coil prices are up 40%, as US imports from Brazil and Steel (million tons) Russia are governed by duty suspension agreements, while CR coil are up 23% partly because of US anti- Crude Steel Production dumping duties of 17%-177% against 12 countries. US steel imports fell 16% in the first 11 eleven months because of anti-dumping measures, and were 500 ---------------------------------- down 29% in November, benefiting both domestic production and prices of restricted products. 250 ------------------------ Global steel production (63 countries reported Semi and Finished Exports bvyIISI) began rising in Julylast year and rosell % or 0 ,,|.,. ,. .,|., 6.6 million tons in November. Output in the CIS is 1975 1980 1985 1990 1995 2000 up by nearly 40% followed by an increase in North Annual Prices (¢/dmtu) America of 18%, whileJapanese production increased 60 by nearly 13% for the month. Constant (]990) Forecast Steel demand is recovering in Asia, particularly 45 _ - - ___, _ ----- -------------… in the auto and manufacturing sectors, while construc- s / ";C non remains depressed. Global economic expansion 30- is expected to lead to 3% growth in steel demand this ,v/ year, froi less than 1% last year. Markets are expected 15… to tighten and prices could continue to rise sharply 15 -------------- ------ Much xwii depend on the pace of demand and the Current Iron Ore 0 ..... ....I-* t.t.. ..... level of inventories, and also the response by steelmakers 1970 1980 1990 2000 2010 in light of the apparent recovery. Trade tensions will remain a concern, and the industr; will continue to be , , ~~~~~~~~~~~~~Source: CVBD, IISI, and Wxorld Bankc forecasts. highly cyclical and volatile. 90 GLOBAL COMMODITY MARKETS IRON ORE AND STEEL IRON ORE PRODUCTION (000 tons) CRUDE STEEL PRODUCTION (000 tons) 1995 1996 1997 1998 1995 1996 1997 1998 China 261,919 252,283 268,623 222,236 China 95,360 101,237 108,911 114,588 Brazil 178,380 179,870 187,950 183,050 US 95,191 95,535 98,486 97,653 Australia 139,067 147,200 157,767 153,459 Japan 101,640 98,801 104,545 93,548 Russian Fed. 78,348 72,136 70,870 72,340 Germany 42,051 39,793 45,007 44,046 India 62,000 67,264 69,400 71,400 Russian Fed. 51,589 49,253 48,502 43,822 US 62,645 62,132 62,737 62,590 Korea D. Rep. 36,772 38,903 42,554 39,896 Ukraine 50,741 47,590 52,990 50,760 Brazil 25,076 25,237 26,153 25,760 Canada 37,629 37,042 38,928 38,908 Italy 27,766 23,910 25,842 25,714 S. Africa, Rep. 32,650 30,829 33,250 32,948 Ukraine 22,309 22,332 25,629 24,445 Sweden 21,663 21,288 21,893 20,930 India 22,003 23,753 24,415 23,480 Venezuela 19,452 18,720 18,660 17,230 France 18,100 17,633 19,767 20,126 Mexico 12,910 14,202 13,244 14,500 UK 17,604 17,992 18,501 17,315 Iran, Islamic R. 9,080 9,850 12,750 12,750 Taiwan, China 11,605 12,350 15,994 16,914 Mauritania 11,330 11,400 11,700 11,402 Canada 14,415 14,735 15,553 15,930 Kazakhstan 14,900 12,980 12,627 8,693 Spain 13,802 12,154 13,683 14,821 Chile 7,950 8,480 8,090 8,280 Mexico 12,147 13,172 14,218 14,211 Turkey 5,510 5,150 8,065 7,383 Turkey 13,183 13,624 14,475 14,144 Peru 5,975 4,468 4,746 4,905 Belgium 11,606 10,818 10,739 11,425 Egypt 2,099 2,700 3,000 3,000 Poland 11,890 10,432 11,585 9,915 New Zealand 2,570 2,600 2,500 2,700 Australia 8,460 8,415 8,831 8,941 Other 21,695 13,726 10,395 8,243 Other 195,051 201,165 214,363 213,835 World 1,038,513 1,021,910 1,070,185 1,007,707 Ubrld 752,260 750,007 798,842 775,941 Source: IISI Source: IISI EXPORTS OF SEMI-FINISHED AND FINISHED EXPORTS OF IRON ORE (000 tons) STEEL(000 tons) 1995 1996 1997 1998 1995 1996 1997 1998 Brazil 131,358 129,740 140,419 143,200 Japan 22,129 19,262 22,892 24,996 Australia 130,223 128,606 144,914 142,134 Russian Fed. 27,371 26,994 26,120 24,831 India 32,332 31,700 31,100 32,200 Germany 20,324 20,437 23,663 22,400 Canada 28,833 27,920 32,340 30,179 Bel.-Lux. 14,190 14,673 16,459 17,647 S. Africa Rep. 21,847 20,091 20,730 22,093 Korea Rep. 9,795 10,438 11,739 17,476 Ukraine 21,015 20,570 20,083 17,702 Ukraine 11,653 12,142 16,147 15,948 Sweden 17,083 16,071 18,282 15,954 France 12,796 13,124 14,884 15,056 Russian Fed. 20,218 17,126 11,773 14,000 Italy 10,173 10,922 10,695 10,192 Mauritania 11,514 11,158 11,700 11,400 Brazil 9,655 10,257 9,163 8,756 Venezuela 10,609 9,580 9,322 8,600 UK 8,896 9,336 9,371 8,332 Kazakhstan 1,180 3,747 9,270 7,354 Nethedands 6,317 6,481 6,819 6,752 Chile 6,114 6,911 7,052 6,700 Taiwan, China 3,027 3,765 5,119 6,022 Peru 6,008 4,029 3,712 4,800 Mexico 5,930 5,352 5,497 5,961 Philippines 4,744 4,546 4,500 4,500 Turkey 6,211 6,697 7,227 5,723 US 5,270 6,256 6,336 3,002 US 6,623 4,641 5,568 5,597 Bahrain 3,200 2,800 3,000 3,000 Spain 4,947 5,486 5,556 5,280 New Zealand 1,316 1,382 1,300 1,300 Canada 4,716 4,929 4,787 5,262 Korea, D. Rep. 300 200 200 200 China 10,745 7,131 8,765 5,206 Slovak Rep. 80 95 81 75 Austria 3,762 3,128 3,724 4,838 Spain 1,552 975 43 55 Sweden 3,217 3,599 3,975 3,832 Other 4,059 2,604 1,102 304 Other 46,014 48,232 49,490 50,703 World 458,855 446,107 477,259 468,752 World 248,491 247,026 267,660 270,810 Source: IISI Source: IISI ja n u a ry 2000 91 _ APPENDIX APPENDIX Annual Averages Quarterly Averages- Monthly Averages- Jan-Dec Jan-Dec Jan-Dec Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Oct Nov Dec Commodity Unit 1997 1998 1999 1998 1999 1999 1999 1999 1999 1999 1999 Coal, Australia $/mt 35.10 29.23 25.96 26.43 26.10 26.10 26.10 25.53 25.60 25.50 25.50 Coal, US $/mt 36.39 34.38 33.17 33.50 33.50 33.17 33.00 33.00 33.00 33.00 33.00 Crude oil, avg. spot* $/bbl 19.17 13.07 18.07 11.85 11.79 16.10 20.65 23.74 21.95 24.16 25.10 Crude oil, Brent* $/bbl 19.09 12.72 17.81 11.09 11.24 15.40 20.54 24.04 21.95 24.59 25.59 Crude oil, Dubai* $/bbl 18.10 12.12 17.16 11.56 11.07 15.26 19.69 22.65 21.26 23.05 23.63 Crude oil, W. TX IntI* $/bbl 20.33 14.35 19.24 12.90 13.05 17.66 21.73 24.52 22.64 24.85 26.08 Natural gas, Europe $/mmbtu 2.74 2.42 2.13 2.15 1.99 1.89 2.09 2.55 2.47 2.51 2.66 Natural aas US $/mmbtu 2.48 2.09 2.27 1.91 1.81 2.23 2.55 2.48 2.72 2.36 2.36 Agriculture Beverages Cocoa- ¢/kg 161.9 167.6 113.5 159.1 139.4 113.6 105.7 95.4 102.2 92.2 91.9 Coffee, arabica** ¢/kg 416.8 298.1 229.1 252.4 238.0 235.5 198.5 244.0 207.7 250.0 274.4 Coffee, robusta** ¢/kg 173.6 182.3 148.9 179.7 172.7 149.1 135.4 138.4 129.0 139.0 147.3 Tea, Calcutta auctons* ¢/kg 214.5 216.5 206.8 190.0 162.3 223.4 224.9 216.6 230.6 221.0 198.3 Tea, Colombo auctons- ¢/kg 202.0 207.5 165.0 181.4 160.3 145.9 170.7 183.4 186.6 184.0 179.5 Tea, Mombasa auctons** ¢/kg 201.5 189.9 179.8 164.6 180.3 175.1 176.9 187.0 199.5 181.2 180.3 Food Fats and Oils Coconut oil** $/mt 656.8 657.9 737.1 740.3 736.0 832.3 681.3 698.7 690.0 703.0 703.0 Copra $/mt 433.8 411.1 461.5 459.3 457.7 521.3 433.7 433.3 430.0 436.0 434.0 Groundnut meal $/mt 221.0 116.2 n.a. 105.0 102.3 n.a. n.a. n.a. n.a. n.a. n.a. Goundnut oil** $/mt 1,010.4 909.4 787.7 857.7 808.0 755.7 781.i7 805.3 804.0 807.0 805.0 Palm oil** $/mt 545.8 671.1 436.0 679.3 563.3 458.7 353.7 368.3 381.0 370.0 354.0 Palmkemel oil $/mt 651.8 686.7 694.1 741.0 704.7 729.0 656.7 686.0 684.0 693.0 681.0 Soybean meal** $/mt 275.8 170.3 152.2 160.7 145.7 140.0 152.3 170.7 173.0 169.0 170.0 Soybean oil** $/mt 564.8 625.9 427.3 606.3 492.3 426.7 406.3 384.0 401.0 382.0 369.0 Soybeans- $/mt 295.4 243.3 201.7 229.0 210.3 200.0 196.3 200.0 203.0 198.0 199.0 Grains Maize** $/mt 117.1 102.0 90.2 96.5 95.9 93.4 85.4 86.1 85.8 85.4 87.2 Rice, Thai, 5%** $/mt 303.5 304.2 248.4 282.2 278.7 244.5 244.3 226.3 217.0 228.0 233.8 Rice, Thai, 25% $/mt 257.1 259.9 216.3 257.7 239.6 211.6 217.9 196.1 190.3 199.2 198.8 Rice, Thai, 35% $/mt 246.8 249.7 210.5 251.6 232.9 205.9 212.7 190.6 186.0 194.0 191.8 Rce,Thai, AI.Special $/mt 210.4 213.0 193.2 238.5 214.2 189.5 201.1 168.1 169.8 172.0 162.5 Sorghum' $/mt 109.6 98.0 84.4 90.0 90.9 87.6 79.5 79.6 78.4 79.4 81.0 Wheat, Canada $/mt 181.4 162.9 151.3 164.7 160.7 148.2 148.2 148.0 147.6 149.5 146.9 Wheat, US, HRW** $/mt 159.5 126.1 112.0 127.7 119.9 112.8 109.2 106.4 108.1 108.8 102.2 Wheat, US, SRW $/mt 143.7 111.5 96.3 109.0 99.5 96.4 93.4 95.9 98.7 96.9 92.1 Other Food + Bananas - EU $/mt 967.7 1001.7 852.2 918.7 1093.1 837.1 739.7 739.0 765.5 725.1 726.5 + Bananas - US new- $/mt 517.1 489.5 373.2 423.3 461.1 346.2 351.6 334.0 327.3 332.4 342.2 Bananas - US old $/mt 502.7 476.2 415.7 458.8 479.3 444.0 406.4 333.0 299.0 395.3 304.7 Beef** /kg 185.5 172.6 184.3 166.2 177.1 175.6 192.5 192.1 186,6 193.9 196.0 Fishmeal $/mt 606.3 661.9 392.5 601.3 453.3 343.3 369.3 404.0 399.0 401.0 412.0 Lamb ¢/kg 339.3 275.0 261.1 264.2 247.0 263.2 267.1 267.0 272.2 266.6 262.3 Orangest $/mt 459.0 442.4 430.8 415.1 420.3 458.6 474.8 369.6 518.0 340.4 250.4 Shnmp ¢/kg 1,612 1,579 1,461 1,427 1,413 1,470 1,485 1,473 1,444 1,488 1,488 Sugar, EU, domesdc' ¢/kg 62.72 59.75 59.17 60.88 59.72 58.78 58.55 59.65 60.61 59.35 59.00 Sugar, US, domes9c' ¢/kg 48.36 48.64 46.60 48.27 49.45 49.88 47.01 40.05 42.84 38.36 38.96 Sugar, world** /kg 25.06 19.67 13.81 17.34 15.40 12.63 13.06 14.14 14.88 14.35 13.18 Raw Materials Timber Logs, Cameroon $/cum 284.8 286.4 269.3 295.9 282.3 255.3 247.2 292.4 269.3 307.5 300.5 Logs, Malaysia- $/cum 238.3 162.4 187.1 162.0 175.3 178.4 195.9 198.8 198.4 198.6 199.5 Plywood ¢/sheet 485.0 376.1 441.3 395.2 426.4 429.9 440.3 468.8 462.4 466.9 477.0 Sawnwood, Cameroon $/cum 563.6 526.3 455.2 532.0 461.5 424.4 441.8 493.1 481.4 504.6 493.2 Sawnwood, Malaysia' $/cum 664.5 484.2 600.8 519.8 544.3 582.8 632.9 643.4 643.4 643.4 643.4 WoodpulD $/mt 556.5 508.4 507.1 458.3 447.6 491.5 521.2 568.3 548.7 578.0 578.0 94 GLOBAL COMMODITY MARKETS APPENDIX Annual Averages- Quarterly Averages - Monthly Averages- Jan-Dec Jan-Dec Jan-Dec Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Oct Nov Dec Commodity Unit 1997 1998 1999 1998 1999 1999 1999 1999 1999 1999 1999 Agriculture (continued) Other Raw Materials Cotton** ¢/kg 174.8 144.5 117.1 127.5 123.9 129.4 113.8 101.3 104.6 101.9 97.4 + Cotton, Memphis ¢Ikg 178.4 165.8 123,0 158.5 n.q. n.q. n.q. 120.5 125.4 119.7 116.3 Jute $/mt 304.6 258.0 276.3 270.0 250.0 260.0 295.0 300.3 301.0 300.0 300.0 Rubber, Malaysia-* ¢/kg 101.8 72.2 62.9 70.6 68.0 59.7 556 68.1 64.7 74.1 65.4 Rubber, NY ¢/kg 121.6 89.5 80.9 87.0 83.7 77.5 74.6 87.7 83.3 94.0 85.7 Rubber, Singapore ¢/kg 101.0 70.9 62.0 69.0 65.5 59.9 55.9 66.9 64.7 70.9 65.2 Sisal $/mt 776.6 820.8 691.5 850.0 779.2 731.7 647.5 607.7 628.0 635.0 560.0 + Wool, Australian 64's ¢/kg 625.3 429.0 398.8 369.9 368.0 400.3 414 2 412.5 418.8 411.2 407.6 Wool, Australian 56's ¢/kg 430.3 336.3 303.6 307.2 301.4 307.8 309 0 296.2 300.6 295.0 293.0 Fertilizers DAP $/mt 199.9 203 4 177.8 204 4 199.3 189.7 173.9 148.2 152.9 144.3 147.5 Phosphate rock- $/mt 41.0 43.0 44.0 43.0 44.0 44.0 44.0 44.0 44.0 44.0 44.0 Potassium chiodde $/mt 116.5 116.9 121.6 118.1 119.1 122.5 122.5 122.5 122.5 122.5 122.5 TSP.. $/mt 171.9 173.1 154.5 168.9 164.1 162.6 150.9 140.4 145.1 138.0 138.0 Urea, E. Europe, bagged $/mt 127.9 103.1 77.8 88.0 79.5 75.9 77.4 78.2 77.5 78.0 79.1 Urea, E. Europe, bulk $/mt 114.0 83.1 66.4 68.3 67.6 64.6 66.1 67.3 66.3 67.1 68.7 Metals and Minerals Aluminum- $/mt 1,599 1,357 1,361 1,283 1,196 1,306 1,443 1,501 1,474 1,473 1,554 Copper-* $/mt 2,277 1,654 1,573 1,545 1,407 1,467 1,679 1,739 1,724 1,728 1,765 Gold $/toz 331.1 294.2 278.8 293.9 286.8 273.5 259.2 295.7 310 7 293.2 283.1 + Iron ore, CVRD Carajas** ¢/dmtu 30.15 31.00 27.59 31.00 27.59 27.59 27.59 27.59 27.59 27.59 27.59 Iron ore, CVRD S. Syst. ¢/dmtu 28.88 29.69 26.96 29.69 26.96 26.96 26.96 26.96 26.96 26.96 26.96 Lead** I/kg 62.4 52.9 50.3 49.6 50.5 51.9 50.2 48.5 49.7 47.8 47.9 Nickel- $/mt 6,927 4,630 6,011 3,961 4,635 5,232 6,392 7,785 7,321 7,950 8,083 Silver ¢/toz 489.2 553.4 525.0 495.8 530.2 515.6 526.7 527.3 541.7 519.2 521.1 Steel products (8) index*** 1990=100 89.1 74.9 68.4 69.0 64.1 66.4 70.4 72.6 72.5 73.0 72.3 Steel-cold rolled coilsheet $/mt 448.2 370.8 340.4 320.0 306.7 328.3 350.0 376.7 370.0 380.0 380.0 Steel-hot rolled coilsheet $/mt 337.3 279.2 243.3 236.7 206.7 223.3 263.3 280.0 280.0 280.0 280.0 Steel, rebar $/mt 325.2 257.5 234.2 240.0 230.0 230.0 240.0 236.7 240.0 240.0 230.0 Steel, wire rod $/mt 382.7 332.1 290.0 326 7 293.3 290.0 290.0 286.7 290.0 290.0 280.0 Tin- I/kg 564.7 554.0 540.4 538.9 524.6 543.6 526.8 566.5 543.1 584.2 572.1 Znc** ¢/kg 131.6 102.5 107.6 95.6 99.3 102.0 113.2 116.0 114.9 114.7 118.4 Petroleum 83.8 57.1 79.0 51.8 51.5 70.4 90.3 103.8 95.9 105.6 109.7 Non-Energy Commodities 117.6 99.1 88.0 94.1 89.5 87.3 86.0 89.1 87.7 89.5 90.2 Agriculture 128,7 107.8 92.8 102.1 97.5 92.8 88.7 92.1 90.5 92.8 93.0 Beverages 170.7 140.6 107.7 124.9 116.0 109.3 97.3 108.1 99.3 109.2 115.9 Food 116.3 104.9 87.5 101.2 95.1 87.1 83.8 84.2 85.8 84.0 82.8 Fats and Oils 147.7 132.8 105.0 131.5 115.6 106.0 96.7 101.9 103.7 101.6 100.3 Grains 112.1 101.3 86.4 96.5 94.3 86.8 83.8 80.6 79.4 81.2 81.2 Other Food 92.9 84.1 73.9 79.1 78.7 71.9 73.2 71.7 74.6 71.2 69.3 Raw Materials 113.7 87.3 88.5 86.4 86.9 88.0 88.6 90.3 90.0 91.9 89.2 Timber 125.8 90.9 111.8 96.7 101.7 108.2 117.7 119.6 119.6 119.6 119.6 Other Raw Materials 105.5 84.9 72.6 79.4 76.8 74.2 68.8 70.4 69.8 73.0 68.4 Fertilizers 119.7 122.1 114.1 120.1 118.7 118.0 112.3 107.3 109.6 106.1 106.1 Metals and Minerals 90.1 75.5 73.7 71.8 67.2 70.7 76.8 80.2 78.9 79.8 81.8 *Included in the petroleum index. -*lncluded in the non-energy index. ***Steel not included in the non-energy index. *-Indices are computed using the new price series for bananas and inon ore. $ = U.S. dollar I = U.S. cent bbl = barrel cum = cubic meter dmtu = dry metric ton kg = kilogram + = new series mmbtu = million Bntish thermal units mt = metric ton toz = troy ounce Note: Fats, oils and oilseeds prices are from Oil Word, Hamburg, Germany ja n u a ry 2000 95 APPENDIX Actual - Projections Commodity Unit 1970 1980 1990 1998 1999 2000 2001 2002 2005 2010 Coal, US $/mt n.a. 43.10 41.67 34.38 33.17 33.00 33.50 34.00 35.50 38.00 Crude oil, avg. spot $/bbl 1.21 36.87 22.88 13.07 18.07 20.00 18.00 17.50 18.00 19.00 Natural gas, Europe $/mmbtu n.a. 3.40 2.55 2.42 2.13 2.70 2.60 2.60 2.60 2.70 Natural qas, US $/mmbtu 0.17 1.55 1,70 2.09 2.27 2.50 2.40 2.35 2.45 2.70 Agriculture Beverages Cocoa ¢/kg 67.5 260.4 126.7 167.6 113 5 112.0 120.0 130.0 150.0 170 0 Coffee, other milds ¢/kg 114.7 346.6 197.2 298.1 229.1 222.7 231.5 234.8 254.0 265.0 Coffee, robusta ¢/kg 91.4 324.3 118.2 182.3 148.9 145.5 158.7 165.4 186.1 192.0 Tea, 3-aucton average ¢/kg 83.5 165.9 205.8 204.6 183.9 186.0 187.0 188.5 195.0 2100 Food Fats and Oils Coconut oil $/mt 397.2 673.8 336.5 657.9 737.1 700.0 650.0 635.0 620.0 650.0 Copra $/mt 224.8 452.7 230.7 411.1 461.5 410.0 425.0 435.0 460.0 483 0 Groundnut oil $/mt 378.6 858.8 963.7 909 787.7 800.0 800.0 800.0 820.0 850 0 Palm oil $/mt 260.1 583.7 289.8 671.1 436 0 415.0 430.0 450.0 460.0 460 0 Soybean meal $/mt 102.6 262.4 200.2 170.3 152 2 189.0 199.0 205.0 215.0 226.0 Soybean oil $/mt 286.3 597.6 447.3 625.9 427.3 405.0 410.0 430.0 500.0 525 0 Soybeans $/mt 116.9 296.2 246.8 243.3 201.7 220.0 230.0 240.0 250.0 275.0 Grains Maize $/mt 58.4 125.3 109.3 102.0 90.2 100.0 110.0 115.0 125.0 130.0 Rice, Thai, 5% $/mt 126.3 410.7 270.9 304.2 2484 260.0 270.0 280.0 315.0 3450 Sorghum $/mt 51.8 128.9 103.9 98.0 84.4 95.0 105.0 110.0 120.0 125 0 Wheat, US, HRW $/mt 54.9 172.7 135.5 126.1 112.0 122.0 130.0 140.0 160.0 1700 Other Food Bananas, US $/mt 166.1 377.3 540.9 489.5 373.2 399.6 452.0 490.6 529.1 540.1 Beef ¢/kg 130.4 276.0 256.3 172.6 184.3 187.4 191.8 194.0 200.0 220 0 Oranges $/mt 168.0 400.2 531.1 442.4 430.8 430.0 450.0 500.0 565.0 600 0 Shdmp ¢/kg n.a. 1,152 1,069 1,579 1,461 1,480 1,500 1,520 1,550 1,590 Sugar, world ¢/kg 8.2 63.16 27.67 19.67 13.81 14.00 14.20 14.50 22.00 25.00 Raw Materials Timber Logs, Cameroon $/cum 43.0 251.7 343.5 286.4 269.3 305.0 315.0 320.0 340.0 4200 Logs, Malaysia $/cum 43.1 195.5 177.2 162.4 187.1 215.0 225.0 235.0 255.0 290.0 Sawnwood, Malyasia $/cum 175.0 396.0 533.0 484.2 6008 645.0 670.0 695.0 755.0 9000 Other Raw Materials Cotton, A Index ¢/kg 67,6 206.2 181.9 144.5 117.1 118.0 130.1 132.3 158.8 1808 Rubber, RSS1, Malaysia ¢/kg 40.7 142.5 86.5 72.2 62.9 70.6 75.0 79.3 88.2 992 Tobacco $/mt 1,076 2,276 3,392 3,342 3,026 3,000 3,000 3,000 3,250 3,300 Fertilizers DAP $/mt 54.0 222.2 171.4 203.4 177.8 165.0 175.0 180.0 195.0 205 0 Phosphate rock $/mt 11.00 46.71 40.50 43.00 44.00 44.00 44.00 44.00 44.00 46.00 Potassium chloride $/mt 32.0 115.7 98.1 116.9 121.6 122.5 124.0 124.0 125.0 127.0 TSP $/mt 43.0 180.3 131.8 173.1 154.5 145.0 150.0 155.0 160.0 170.0 Urea, E. Europe, bagged $/mt 48.0 222.1 130.7 103.1 77.8 90.0 100.0 110.0 120.0 140.0 Metals and Minerals Aluminum $/mt 556 1,456 1,639 1,357 1,361 1,550 1,600 1,650 1,800 1,900 Copper $/mt 1,416 2,182 2,661 1,654 1,573 1,800 1,900 2,000 2,200 2,400 Gold $/toz 36.0 608.0 383.5 294.2 278 8 285.0 280.0 275.0 275.0 300.0 Iron ore, Carajas ¢/dmtu 9.84 28.09 32.50 31.00 27.59 29.00 29.50 30 25 32.00 33.00 Lead ¢/kg 30.3 90.6 81.1 52.9 50.3 51.0 54.0 56.0 60.0 64.0 Nickel $/mt 2,846 6,519 8,864 4,630 6,011 7,500 7,200 7,000 6,000 6,800 Silver ¢/toz 177.0 2,064 482.0 553.4 525 0 520.0 515.0 510.0 525.0 550.0 Tin ¢/kg 367.3 1,677 608.5 554.0 540.4 560.0 560.0 570.0 590.0 610.0 Znc ¢/kg 29.6 76.1 151.4 102.5 107.6 115.0 16.0 117.0 120.0 125.0 n.a. = not available Note: Projections as of January 20, 2000. Source: World Bank, Development Economics, Development Prospects Group 96 GLOBAL COMMODITY MARKETS APPENDIX Commodib2 Unit001 2002 2005 Coal, US $/mt 27.00 - 39.00 25.50 - 41.50 24.00 - 44.00 22.00 - 49.00 Crude oil, avg. spot $/bbl 16.00 - 25.00 13.50 - 23.00 11.70 - 23.50 10.75 - 25.25 Natural gas, Europe $/mmbtu 2.20 - 3.30 2.00 - 3.30 1.75 - 3.45 1.60 - 3.60 Natural gas, US $/mmbtu 2.00 - 3.00 1.80 - 3.00 1.60 - 3.10 1.50 - 3.40 Agriculture Beversges Cocoa ¢/kg 96 - 128 95 - 146 89 - 172 82 - 219 Coffee, other milds ¢/kg 186 - 260 178 - 286 153 - 317 134 - 373 Coffee, robusta ¢/kg 122 - 171 123 - 196 111 - 221 113 - 261 Tea, 3-aucton average ¢/kg 158 - 223 146 - 234 139 - 245 140 - 263 Food Fats and Oils Coconut oil $/mt 609 - 802 558 - 854 494 - 927 452 - 1,050 Copra $/mt 352 - 469 349 - 502 325 - 547 296 - 613 Groundnut oil $/mt 684 - 897 628 - 937 621 - 1,009 583 - 1,138 Palm oil $/mt 355 - 478 346 - 538 354 - 617 333 - 733 Soybean meal $/mt 159 - 223 155 - 243 155 - 288 151 - 312 Soybean oil $/mt 347 - 462 344 - 511 345 - 588 377 - 784 Soybeans $/mt 185 - 260 179 - 281 180 - 335 163 - 363 Grains Maize $/mt 82 - 122 86 - 136 93 - 158 81 - 179 Rice, Thai, 5% $/mt 213 - 317 205 - 346 227 - 416 204 - 451 Sorghum $/mt 78 - 116 82 - 130 89 - 151 78 - 172 Wheat, US, HRW $/mt 100 - 149 101 - 161 118 202 104 - 229 Other Food Bananas, US $/mt 354 - 446 379 - 526 405 - 578 417 - 642 Beef ¢/kg 150 - 225 150 - 234 144 - 268 140 - 290 Oranges $/mt 323 - 538 324 - 576 396 - 735 379 - 752 Shdmp ¢/kg 1,214 - 1,746 1,170 - 1,830 1,116 - 2,046 1008 - 2,201 Sugar, wodd ¢/kg 11.9 - 16.1 11.1 - 17.3 15.4 - 29.7 14.7 - 33.0 Raw Materials Timber Logs, Cameroon $/cum 244 - 372 224 - 400 195 - 432 187 - 493 Logs, Malaysia $/cum 174 - 264 169 - 281 165 - 306 153 - 357 Sawnwood, Malyasia $/cum 497 - 787 516 - 817 500 - 876 468 - 1,027 Other Raw Materials Cotton, A Index ¢/kg 99 - 133 110 - 151 98 - 166 102 - 214 Rubber, RSS1, Malaysia 4/kg 61 - 80 61 - 89 62 96 61 - 116 Tobacco $/mt 2,550 - 3,450 2400 - 3,600 2438 - 4,063 2178 - 4,323 Fertlizers DAP $/mt 135 - 201 137 - 214 140 - 254 137 - 273 Phosphate mock $/mt 37 - 51 37 - 52 35 - 53 33 - 55 Potassium chlodde $/mt 104 - 141 99 - 149 94 - 156 88 - 169 TSP $/mt 119 - 177 117 - 183 115 - 208 112 - 224 Urea, E. Europe, bagged $/mt 74 - 110 75 - 125 86 - 161 84 - 174 Metals and Minerals Aluminum $/mt 1,240 - 1,860 1,200 - 2,000 1,100 - 2,200 1,075 - 2,525 Copper $/mt 1,440 - 2,160 1,425 - 2,375 1,330 - 2,670 1,300 - 3,100 Gold $/toz 230 - 340 210 - 350 185 - 365 170 - 385 Iron ore, Carajas ¢/dmtu 24 - 34 23 - 36 23 - 38 22 - 43 Lead 4/kg 41- 61 41- 68 38- 75 36 -84 Nickel $/mt 6,000 - 9,000 4,800 - 9,600 4,200 - 9,800 3600 - 8,400 Silver ¢/toz 415 - 625 385 - 645 340 - 680 315 - 735 Tin 4/kg 450 - 670 420 - 700 380 - 760 355 - 825 inc ¢/kg 92 - 138 87 - 145 78 - 156 72 168 Note: Projectons as of January 20, 2000. Soure: Wodd Bank, Development Economics, Development Prospects Group ja n u a ry 2000 97 APPENDIX Actual Projections Commodity Unit 1970 1980 1990 1998 1999 2000 2001 2002 2005 2010 Coal, US $/mt n.a. 59.88 41.67 33.00 32.03 31.09 30.79 30.46 29.70 28.13 Crude oil, avg. spot $/bbl 4.82 51.22 22.88 12.54 17.45 18.84 16.54 15.68 15.06 14.06 Natural gas, Europe $/mmbtu n.a. 4.72 2.55 2.32 2.06 2.54 2.39 2.33 2.18 2 00 Natural gas, US $/mmbtu 0.68 2.15 1.70 2.00 2.19 2.36 2.21 2.11 2.05 2.00 Agriculture Beverages Cocoa ¢/kg 269.1 351.7 126.7 160.9 109.6 105.5 110.3 116.5 125.5 125.8 Coffee, other milds ¢/kg 457.2 481.6 197.2 286.1 221.2 209.8 212.8 210.3 212.5 196.2 Coffee, robusta ¢/kg 364.3 450.6 118.2 174.9 143.8 137.1 145.9 148.1 155.7 142.1 Tea, 3-aucton average ¢/kg 332.9 230.5 205.8 196.4 177.6 175.2 171.9 168.9 163.2 155.5 Food Fats and Oils Coconut oil $/mt 1583.7 936.1 336.5 631.5 711.8 659.4 597.4 568.8 518.8 481.2 Copra $/mt 896.5 629.0 230.7 394.6 445.6 386.3 390.6 389.7 384.9 357.5 Groundnut oil $/mt 1509.4 1193.0 963.7 872.8 760.6 753.7 735.3 716.7 686.1 629.2 Palm oil $/mt 1036.9 810.9 289.8 644.1 421.0 391.0 395.2 403.1 384.9 340.5 Soybean meal $/mt 409.0 364.6 200.2 163.5 146.9 178.1 182.9 183.6 179.9 167.3 Soybean oil $/mt 1141.7 830.2 447.3 600.8 412.6 381.5 376.8 385.2 418.4 388.6 Soybeans $/mt 466.2 411.5 246.8 233.5 194.7 207.3 211.4 215.0 209.2 203.6 Grains Maize $/mt 232.9 174.0 109.3 97.9 87.1 94.2 101.1 103.0 104.6 96.2 Rice, Thai, 5% $/mt 503.6 570.6 270.9 291.9 239.9 244.9 248.2 250.8 263.6 255.4 Sorghum $/mt 206.5 179.0 103.9 94.1 81.5 89.5 96.5 98.5 100.4 92.5 Wheat, US, HRW $/mt 218.9 240.0 135.5 121.1 108.2 114.9 119.5 125.4 133.9 125.8 Other Food Bananas, US $/mt 662.2 524.1 540.9 469.8 360.4 376.5 415.4 439.5 442.7 399.8 Beef ¢/kg 520.1 383.4 256.3 165.6 178.0 176.5 176.3 173.8 167.4 162.9 Oranges $/mt 670.0 556.0 531.1 424.6 416.0 405.1 413.6 447.9 472.8 444.2 Shrmp ¢/kg n.a. 1,600 1,069 1,515 1,410 1,394 1,379 1,362 1,297 1,177 Sugar, world ¢/kg 32.8 87.8 27.7 18.9 13.3 13.2 13.1 13.0 18.4 18.5 Raw Materials Timber Logs, Cameroon $/cum 171.5 349.7 343.5 274.9 260.0 287.3 289.5 286.7 284.5 310.9 Logs, Malaysia $/cum 172.0 271.6 177.2 155.9 180.7 202.5 206.8 210.5 213.4 214.7 Sawnwood, Malyasia $/cum 697.8 550.2 533.0 464.7 580.2 607.6 615.8 622.6 631.8 666.2 Other Raw Materials Cotton, A Index ¢/kg 269.7 286.5 181.9 138.7 113.1 111.1 119.6 118.5 132.8 133.8 Rubber, RSS1, Malaysia ¢/kg 162.4 197.9 86.5 69.3 60.7 66.5 68.9 71.1 73.8 73.4 Tobacco $/mt 4,290 3,161 3,392 3,207 2,921 2,826 2,757 2,687 2,719 2,442 Fertilizers DAP $/mt 215.3 308.7 171.4 195.2 171.7 155.4 160.9 161.3 163.2 151.8 Phosphate rock $/mt 43.9 64.9 40.5 41.3 42.5 41.5 40.4 39.4 36.8 34.1 Potassium chlonde $/mt 127.6 160.8 98.1 112.2 117.5 115.4 114.0 111.1 104.6 94.0 TSP $/mt 171.5 250.4 131.8 166.1 149.2 136.6 137.9 138.9 133.9 125.8 Urea, E. Europe, bagged $/mt 191.4 308.6 130.7 98.9 75.1 84.8 91.9 98.5 100.4 103.6 Metals and Minerals Aluminum $/mt 2,217 2,023 1,640 1,303 1,314 1,460 1,471 1,478 1,506 1,406 Copper $/mt 5,645 3,031 2,661 1,587 1,519 1,696 1,746 1,792 1,841 1,777 Gold $/toz 143.5 844.7 383.5 282.3 269.2 268.5 257.4 246.4 230.1 222.1 Iron ore, Carajas ¢/dmtu 39.2 39.0 32.5 29.8 26.6 27.3 27.1 27.1 26.8 24.4 Lead ¢/kg 120.8 125.8 81.1 50.7 48.5 48.1 49.6 50.2 50.2 47.4 Nickel $/mt 1,1348 9,056 8,864 4,443 5,805 7,065 6,618 6,271 5,020 5,034 Silver ¢/toz 705.7 2866.9 482.0 531.2 506.9 489.9 473.4 456.9 439.3 407.1 Tin ¢/kg 1,464.7 2,330.5 608.5 531.8 521.8 527.6 514.7 510.6 493.7 451.6 Znc ¢/k 118.0 105.8 151.4 98.3 103.9 108.3 106.6 104.8 100.4 92.5 _KNu n.a. = not available Note: Pmojectons as of January 20, 2000. Source: Wodd Bank, Development Economics, Development Prospects Group 98 GLOBALL COMMODITY MARKETS APPENDIX Commodity Unit 2000 2001 2002 2005 Coal, US $/mt 25.44 - 36.74 23.44 - 38.14 21.50 - 39.42 18.41 - 41.00 Crude oil, avg. spot $/bbl 15.07 - 23.55 12.41 - 21.14 10.48 - 21.05 9.00 - 21.13 Natural gas, Europe $/mmbtu 2.07 - 3.11 1.84 - 3.03 1.57 - 3.09 1.34 - 3.01 Natural gas, US $/mmbtu 1.88 - 2.83 1.65 - 2.76 1.43 - 2.78 1.26 - 2.84 Agriculture Beverages Cocoa ¢/kg 90 - 121 88 - 134 79 - 154 69 - 183 Coffee, other milds ¢/kg 175 - 245 163 - 263 137 - 284 112 - 312 Coffee, robusta ¢/kg 115 - 161 113 - 180 100 - 198 95 - 219 Tea, 3-auction average ¢/kg 149 - 210 134 - 215 125 - 220 117 - 220 Food Fats and Oils Coconut oil $/mt 573 - 756 513 - 785 442 - 831 379 - 879 Copra $/mt 331 - 442 321 - 461 291 - 490 248 - 513 Groundnut oil $/mt 645 - 845 577 - 861 556 - 903 488 - 952 Palm oil $/mt 334 - 450 318 - 494 317 - 553 279 - 614 Soybean meal $/mt 150 - 210 143 - 223 139 - 258 126 - 261 Soybean oil $/mt 327 - 435 317 - 470 309 - 527 316 - 656 Soybeans $/mt 174 - 245 165 - 258 161 - 300 136 - 303 Grains Maize $/mt 77 - 115 79 - 125 83 - 141 68 - 150 Rice, Thai, 5% $/mt 201 - 299 189 - 318 203 - 372 171 - 377 Sorghum $/mt 73 - 109 75 - 120 80 - 135 65 - 144 Wheat, US, HRW $/mt 94 - 140 93 - 148 106 - 181 87 - 191 Other Food Bananas, US $/mt 334 - 421 348 - 484 362 - 517 349 - 537 Beef ¢/kg 141 - 212 138 - 215 129 - 240 117 - 243 Oranges $/mt 304 - 506 298 - 529 354 - 658 317 - 629 Shdmp, Mexican ¢/kg 1,143 - 1,645 1,075 - 1,682 1,000 - 1,833 843 - 1,842 Sugar, wodd ¢/kg 11.2 - 15.2 10.2 - 15.9 13.8 - 26.6 12.3 - 27.6 Raw Materials Timber Logs, Cameroon $/cum 230 - 351 206 - 368 175 - 387 156 - 413 Logs, Malaysia** $/cum 164 - 249 155 - 259 147 - 274 128 - 299 Sawnwood, Malyasia** $/cum 468 - 741 474 - 751 448 - 784 392 - 859 Other Raw Materials Cotton ¢/kg 94 - 126 101 - 139 88 - 148 86 - 179 Rubber, RSS1, Malaysia ¢/kg 58 - 75 56 - 82 56 - 86 51 - 97 Tobacco $/mt 2,402 - 3,250 2,206 - 3,309 2,184 - 3,640 1,822 - 3,617 Fertilizers DAP $/mt 127 - 190 125 - 196 126 - 227 114 - 228 Phosphate rock $/mt 35 - 48 34 - 48 32 - 47 28 - 46 Potassium chloride $/mt 98 - 133 91 - 137 84 - 140 73 - 141 TSP $/mt 112 - 167 108 - 168 103 - 186 94 - 187 Urea, E. Europe, bagged $/mt 70 - 103 69 - 115 77 - 144 70 - 146 Metals and Minerals Aluminum $/mt 1,168 - 1,752 1,103 - 1,838 985 - 1,971 900 - 2,113 Copper $/mt 1,357 - 2,035 1,310 - 2,183 1,191 - 2,392 1,088 - 2,594 Gold $/toz 217 - 320 193 - 322 166 - 327 142 - 322 Iron ore, Carajas ¢/dmtu 23 - 32 21 - 33 20 - 34 18 - 36 Lead ¢/kg 39- 57 37- 62 34- 67 30 -70 Nickel $/mt 5,652 - 8,479 4,412 - 8,824 3,762 - 8,779 3,012 - 7,029 Silver ¢/toz 391 - 589 354 - 593 305 - 609 264 - 615 Tin ¢/kg 424 - 631 386 - 643 340 - 681 297 - 690 Zinc ¢/kg 87 -130 80 - 133 70 - 140 60 - 141 Note: Projectons as of January 20, 2000. Source: Wodd Bank, Development Economics, Development Prospects Group j a n u a ry 2000 99 APPENDIX Actual Projections- 1970 1980 1990 1998 1999 2000 2001 2002 2005 2010 Non-Energy Commodites- 43.8 125.5 100.0 99.1 88.0 92.9 96.5 99.7 108.4 116.7 Agriculture 45.8 ;W1381 1000 107.8 92.8 96.5 100W.8 104.2 114.5 123.9 Beverages 56.9 181.4 100.0 140.6 107.7 105.6 110.5 114.1 125.2 133.3 Food 46.7 139.3 100.0 104.9 87.5 93.1 96.7 100.1 109,1 113.5 Fats and oils 64.4 148.7 100.0 132.8 105.0 111.3 114.4 118.1 122.7 128.1 Grains 46.7 134.3 100.0 101.3 86.4 93.0 98.9 103.9 116.3 124.4 Other food 32.2 134.3 100.0 84.1 73.9 78.3 80.9 83.3 93.9 95.4 Raw materials 3 104.60 1 00.0 87.3 88584.2 98.9 102.2 113.6 130.3 Timber 31.8 79.0 100.0 90.9 111.8 121.0 125.9 130.7 141.9 168.2 Other Raw Matenals 39.6 122.0 100.0 84.9 72.6 75.8 80.5 82.8 94.3 104.4 Fertilizers 30.4 128,9 100.0 122.1 114.1 111.9 111.9, 114.3 116.7 123.3 Metals and minerals X X40.4 0 94.2 100.0 755 73.7 823 84 871 92,7 98.6 Polu; : :::21.01 223.80 f 10:\0.0\0 54,8 76.3 82'S.4: 72.:t30: 6\ 8.5 65.8 61.5 Non-Energy Commodities' 174.7 174.3 100.0 95.1 84.9 87.5 88.7 89.3 90.7 86.4 Agriculture 182.4 :191q.8 100 035 896 909 926 93.4 95.8 91.7 Beverages 226.7 252.0 100.0 134.9 104.0 99.5 101.6 102.2 104.8 98.7 Food 186.0 193.4 100.0 100.7 84.5 87.7 88.8 89.7 91.3 84.0 Fats and oils 256.4 206.5 100.0 127.5 101.4 104.8 105.1 105.8 102.7 94.8 Grains 186.1 186.5 100.0 97.2 83.4 87.6 90.9 93.1 97.3 92.1 Other food 128.4 186.6 100.0 80.8 71.3 73.8 74.3 74.6 78.5 70.6 Raw materials 145.1 1452 00. 10 83.8 5.40 88.7 90.9 901.6 95.1 96.4 Timber 126.6 109.7 100.0 87.3 107.9 114.0 115.7 117.1 118.8 124.5 Other Raw Materials 157.7 169.5 100.0 81.5 70.1 71.4 74.0 74.2 78.9 77.3 Fertilizers 121.1 179;0 100.0 117.2 110.1 102.9 102.4 97.7 91.3 Metals and minerals 160.30,8 100.0 72.4 71.2 77.6 77 78.0 77.5 73.0 MUV index'*** 25.08 71.98 100.00 104.19 103.56 106.15 11)8.80 111.63 119.51 135.09 % change per annum :11.12 3,34 0.51 -0.0 2.50 2.50 2.60 2.30 2.48 US GDP deflator 32.69 64.53 100.00 120.41 121.97 123.80 126.03 128.55 136.95 151.80 % change per annum 7.04 :4.4 2.35 1.30 1450 1.80 2.00 2.13 2.08 *Commodity price projectons as of January 20, 2000. -The Worid Bank prmary commodity price indices are computed based on 1987-89 export values in US dollars for ow- and middle-income economies, rebased to 1990. Weights for the sub-group indices expressed as ratios to the non-energy index are as follows in percent: agrculture 69.1, fertilizers 2.7, metals and minerals 28.2; beverages 16.9, food 29.4, raw rriaterials 22.8; fats and oils 10.1, grains 6,9, other food 12.4; timber 9.3 and other raw mterals 13.6. -*Computed from unrounded data and deflated by the MUV index ****lnflaton indices for 1998-2010 are projectons as of October 19, 1998. Data for 1997, US GDP deflator is actual; MUV is a preliminary estimate. Growth rates for years 1980, 1990, 1997, 2005 and 2010 refer to compound annual rate of change between adjacent end-point years; all others are annual growth rates from the previous year ***Unit value index in US dollar terms of manufactures exported from the G-5 countries (France, Germany, Japan, UK, and US) weighted proportionally to the countres' exports to the developing countries Source. World Bank, Development Prospects Group; Historcal US GDP deflator; US Department of Commerce. 100 GLOBA]L COMMODITY MARKETS TECHNICAL NOTES Description of Price Series Aluminum (LME) London Metal Exchange, unalloyed primary DAP (diammonium phosphate), bulk, spot, f.o.b. US Gulf ingots, high grade, minimum 99.7% purity, cash price Fishmeal (any origin), 64-65%, c&f Hamburg, nfs Bananas (Central & South American). major brands, c.i.f. Hamburg Gold (UK), 99.5% fine, London afternoon fixing, average of daily Bananas (Central & South American), major brands, US import rates price, free on truck (f.o.t.) US ports, new series Groundnut meal (Argentine), 48/50%, c.i.f. Rotterdam Bananas (Central & South American), first-class quality tropical pack, importer's price to jobber or processor, f.o.r. US ports Groundnut oil (any origin), c.i.f. Rotterdam Beef (Australian/New Zealand), cow forequarters, frozen bone- Iron ore (Brazilian), CompanhiaVale do Rio Doce (CVRD) Carajas less, 85% chemical lean, c.i.f. U.S. port (East Coast), ex-dock fines, 67.35% Fe (iron) content (dry weight) ores, moisture con- tent 8.0%, contract price to Europe, f.o.b. Ponta da Madeira. Unit Coal (Australian), thermal, 12,000 btu/lb, less than 1.0% sulfur, dry metric ton unit (dmtu) stands for mt 1% Fe-unit. To convert 14% ash, f.o.b. piers, Newcastle/Port Kembla price in cents/dmtu to $Idmt SSF (dry ore), multiply by percent Fe content. Coal (US), thermal, 12,000 btu/lb, less than 1.0% sulfur, 12% ash, f.o.b. piers, Hampton Road/Norfolk Iron ore (Brazilian), CVRD Southern System standard sinter fines (SSF), 64.2% Fe ores, moisture content 6.5%, contract price to Cocoa (ICCO), International Cocoa Organization daily price, av- Europe, fo.b. Tubarao. erage of the first three positions on the terminal markets of New York and London, nearest three future trading months Jute (Bangladesh), raw, white D, f.o.b. Chittagong/Chalna Coconut oil (Philippines/Indonesian), bulk, c.i.f. Rotterdam Lamb (New Zealand), frozen whole carcasses, wholesale price, Smithfield market, London Coffee (ICO), International Coffee Organization indicator price, other mild Arabicas, average New York and Bremen/Hamburg Lead (LME), refined, 99.97% purity, settlement price markets. ex-dock Logs (West African), sapele, high quality (loyal and marchand Coffee (ICO), International Coffee Organization indicator price, LM), f.o.b. Cameroon; beginning January 1996, LM 80 centimeter Robustas, average New York and Le Havre/Marseilles markets, or more ex-dock Logs (Malaysian), meranti, Sarawak, sale price charged by im- Copper (LME), grade A, minimum 99.9935% purity, cathodes porters, Tokyo; prior to February 1993, average of Sabah and and wire bar shapes, settlement price Sarawak weighted by Japanese import volumes Copra (Philippines/Indonesian), bulk, c.i.f. N.W. Europe Maize (US), no. 2, yellow, fo.b. US Gulf ports Cotton ("cotton outlook", "A" index), middling 1-3/32 inch, aver- Natural Gas (Europe), average import border price age of the cheapest 5 of 15 styles traded in Northern Europe, c.i.f. Natural Gas (U.S.), spot price at Henry Hub, Louisiana Cotton (US), Memphis/Eastern, middling 1-3/32 inch, c.i.f. North- em Europe, one of the 15 styles based on which the Cotlook A Nickel (LME), cathodes, minimum 99.8% purity, official mom- Index is computed ing session, weekly average bid/asked price Crude oil (spot), average spot price of Brent, Dubai and West Oranges (Mediterranean exporters) navel, EEC indicative import Texas Intermediate, equally weighed price, c.i.f. Paris Crude oil (spot). U.K. Brent 38' API, f.o.b. U.K ports Palm oil (Malaysian), 5% bulk, c.i.f. N. W. Europe Crude oil (spot), Dubai Fateh 32' API, f.o.b. Dubai Palmkernel Oil (Malaysian), c.i.f. Rotterdam Crude oil (spot), West Texas Intermediate (WTI) 40' API, f.o.b. Phosphate rock (Moroccan), 70%BPL, contract, fa.s. Casablanca Midland Texas january 2000 101 TECHNICAL NOTES Description of Price Series (continued) Plywood (African and Southeast Asian), Lauan, 3-ply. extra, 91 cum x 182 coum x 4 mm, wlholesale price, spot Tokyo Steel products price index, 1990=1 00. (Japanese), composite price index for eight selected steel products based on quotations f.o.b. Potassium chloride (muriate of potash), standard grade, spot. Japan excluding shipments to the United States and China, weighted f.o.b. Vancouver by product shares of apparent combined consumption (volume of deliveries) at Germany. Japan and the United States. The eight Rice (Thai). 5% broken. WR. milled, indicative price based on products are as follow: rebar (concrete reinforcing bars), merch bar weekly surveys of export transactions (indicative survey price), (merchant bars), wire rod, section (H-shape), plate (medium), hot government standard. f.o.b. Bangkok rolled coil/sheet, cold rolled coil/sheet, and galvanized iron sheet Sugar (EU), European Union negotiated import price for raw un- Rice (Thai), 25% broken, WR, milled indicative survey price, packed sugar from African, Caribbean and Pacific (ACP) under government standard. fo.b. Bangkok Lome Conventions, c.i.ft European ports Rice (Thai). 35% broken, WR, milled, indicative survey price, Sugar (US), import price, nearest future, c.i.f. New York government standard, f.o.b. Bangkok Sugar (world), International Sugar Agreement (ISA) daily price, Rice (Thai), 1 00% broken, A. I Special, broken kernel obtained raw, fo.b. and stowed at greater Caribbean ports from the milling of WR 15%, 20%, and 25%, indicative price, government standard, fo.b. Bangkok Tea (Calcutta auctions), leaf. include excise duty, arithmetic aver- ages of weekly quotes Rubber (Malaysian), RSS no. ], in bales, Malaysian Rubber Ex- change & Licensing Board, midday buyers' asking price for prompt Tea (Colombo auctions), Sri Lankan origin, all tea, arithmetic aver- or 30 days delivery, fo.b. Kuala Lumpur ages of weekly quotes Rubber (any origin), RSS no. ], in bales, RubberTraders Associa- Tea (Mombassa/Nairobi auctions), African origin, all tea, arith- tion (RTA), spot, New York metic averages of weekly quotes Rubber (Asian). RSS no. 1. in bales, Rubber Association of Tin (LME), refined. 99.85% purity, settlement price Singapore Commodity Exchange (RASCE)/ Singapore Commod- ity Exchange. midday buyers' asking price for prompt or 30 days TSP (triple super-phosphate), bulk, spot, fo.b. US Gulf delivery: prior to June 1992, spot, Singapore Urea, (varying origins), bagged, spot, f.o.b. Eastern Europe Sawnwood (Cameroonian), sapele, width 6 inches or more, length 6 feet or more., fa.s. Caineroonian ports Urea, (varying origins), bulk, spot, f.o.b. Eastern Europe Sawnwood (Malaysian), dark red serava/meranti, select and bet- Wheat (Canadian), no. ], Western Red Spring (CWRS), in store, ter quality, General Market Specification (GMS), width 6 inches St. Lawrence, export price or more, average 7 to 8 inches; length 8 inches or more, average 12 to 14 inches: thickness I to 2 inch(es): kiln dry, c. & f. UK ports Wheat (US), no. I. hard red winter, ordinary protein, export price delivered at the Gulf port for protnpt or 30 days shipment Shrimp, (Mexican), frozen, white. No. 1, shell-on, headless, 26/ 30 count per pound, wholesale price at New York Wheat (US), no. 2, soft red winter, export price delivered at the Gulf port for prompt or 30 days shipment Silver (lHandy & l-larman), 99.9% grade refined, New York Woodpulp (Swedish), softwood, sulfate, bleached, air-dry weight, Sisal (East African), UG (rejects), c.i.f. UK c.i.f. North Sea ports Sorghum (UIS). no. 2 milo yellow, fo.b. Gulf ports Wool (Australian), crossbred. 56's. clean, c.i.f: UK Soybean meal (any origin), Argentine 45/46% extraction, c.i.f. Wool (Australian), merino, 64's, clean, c.i.f UK Rotterdam, prior to 1990. US 44% Zinc (LME), special high grade, minimum 99.995% purity, weekly Soybean oil (Dutch), crude, fo.b. ex-mill average bid/asked price, official morning session; prior to April 1990, high grade, minimum 99.95%'/ purity, settlement price Soybeans (US). c.i.tf. Rotterdam 102 GLOBAL COMMODITY MARKETS TECHNICAL NOTES Definitions and Explanations Annual growth rates are calculated by least squares units as the monthly data for comparison purposes, regressions for the three sub-periods (1970-80, 1980- however they are not adjusted for qualitv or transporta- 90, 1990-most recent figure). Because the selection of tion. Thus, the futures prices wvill often have a signifi- breaks is admittedly ad hoc, in the sense that it is based cant margin from the actual monthly prices, but this solely on the fact that 1980 and 1990 represent the margin should not be interpreted as the expected direc- beginning and the end of their respective decades, the tion of future price movements. Rather, it is the path break points are introduced in the estimation process of futures prices which is considered to have economic through a kinked growth model. This model imposes meaning. the restriction that the three growth lines intersect at 1980 and 1990, which implies that one sub-period's Price indexes were computed by the Laspeyres for- observations will affect the growth rates of the other mula. The Non-Energy Price Index is comprised of sub-periods. The growth rates are updated in each 33 commodities. U.S. dollar prices of each commodity January issue of this report. The full results and de- are weighted by 1987-89 average export values. Base tails about the methodology can be found in a forth- year reference for all indexes is 1990. Countries com- coming paper "Unit Roots V7ersus Trend Stationarity prised of all low and middle income economies ac- in Growth Rate Estimation," which will also be avail- cording to W"orld Bank income classification. Details able on our GCMW web site. are shown in Table Al Commodity Price Data. Constant prices are prices wvhich are deflated by the Regions are classified according to the World Bank's Manufactures Unit Value Index (MUV), with a base of analytical groupings. 1990=100. The MUV is the unit value index in US dollar terms of manufactures exported from the G-5 Reporting period. Calendar vs. crop or marketing countries (France, Germany, Japan, UK, and US), year refers to the span of the year. It is common in weighted proportionally to the countries' exports to the many agricultural commodities to refer to production developing countries. and other variables over the twelve month period wlhich begins with harvest. A crop or marketing year will of- Dollars are US dollars unless otherwise specified. ten differ by commodity and, in some cases, by countrv or region. Commodities such as metals use calendar Futures prices shoxvn in this report are end of quarter year. closing prices. The prices are converted to the same Tons refer to metric tons (1,000 kilograms). j a n u a ry 2000 103 TECHNICAL NOTES Acronyms and Abbreviations ACP African, the Caribbean, and the Pacific kg kilogram API American Petroleum Institute KLCE Kuala Lumpur Commodity Exchange bbl barrel kt thousand ton BP British Petroleum lb pound Bel-Lux Belgium/Luxemburg LIBOR London Interbank Offer Rate c.i.f. cost, insurance, and freight LIFFE London International Financial and Futures and Op- CBOT Chicago Board of Trade tions Exchange CSCE Coffee, Sugar, and Cocoa Exchange LME London Metal Exchange cum cubic meter mb/d million barrels per day CVRD Companhia Vale do Rio Doce MGE Minneapolis Grain Exchange dmtu dry metric ton unit mmbtu millions of British thermal units dwt dead weight ton mt metric ton EU European Union mtoe million tons of oil equivalent ECE Economic Commission for Europe MUV Manufactures unit value f£o.b. free on board n.a. data not available f.o.r. free on rail NIKKEI Nihon Keizai Shimbun, Inc. f.o.t free on truck nil. data less than half the unit shown FAO Food and Agriculture Organization of the NMFS The National Marine Fisheries Service United Nations NYCE New York Cotton Exchange FSU Former Soviet Union NYMEX New York Mercantile lExchange G-5 France, Germany,Japan, United Kingdom, and OECD Organization for Economic Cooperation and Devel- Utnited States opment G-7 G-5 plus Canada and Italy OPEC Organization of Petroleum Exporting Countries GATT General Agreement on Tariffs and Trade QR Quantitative Restrictio:ns GDP Gross domestic product PNG Papua New Guinea GNP Gross national product SDR Special drawing right ha hectare SICOM Singapore Commodity Exchange ICAC International Cotton Advisory Committee ton metric ton ICCO International Cocoa Organization TRQ Tariff Rate Quotas ICO International Coffee Organization UAE United Arab Emirates IEA International Energy Agency UN United Nations IGC International Grains Council UNCTAD United Nations Conference on Trade and Development IISI International Iron and Steel Institute US DOE US Department of Energy IMF International Monetary Fund USDA US Department of Agriculture INRO International Natural Rubber Organization WBMS World Bureau of Metal Statistics IRSG International Rubber Study Group WFP World Food ProgrammLe ISO International Sugar Organization WHO World Health Organization ITC International Tea Conmmittee WSJ The Wall StreetJournal ITTO International Tropical Timber Organization WTO World Trade Organization 104 GLOBAL COMMODITY MARKETS Subscription Information Global Commodi_y Markets (ISSN: 1020-721X) provides coverage of 46 primary commodies, price forecasts, including regional price indices, transportation costs, and access to the World Bank's Macroeconomic Outlook. 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