By Gustavo Capdevila
GENEVA, Jun 8 2001 (IPS)

The major economic transformations underway in the world are fuelling uncertainty of international commodities markets, says the United Nations Conference on Trade and Development (UNCTAD), which released its “World Commodity Survey 2000-2001” Friday.

The globalisation and liberalisation of the world’s economies continue to introduce profound changes in production methods, marketing and finance, which have an impact on commodities and raw materials, says the report.

These transformations take on added importance because trade in this sector represents one-fourth of all international merchandise trade.

In Africa, in particular, this sector reflects an average of three-fourths of national export revenues.

The economic weight of commodities and raw materials is even more critical when it comes to the 49 least-developed countries because these products are the sustenance of their economies, says the United Nations agency.

The UNCTAD study indicates that the shifts perceived in the commodities sector in 1999 persisted and intensified in 2000.

The dynamic of industrial demand in North America and Europe, and especially in Asia, continued to stimulate the market in 2000 of the leading industrial commodities.

As a result, there was a rise in prices for metals, chemicals, paper and even some agricultural raw materials. The biggest gains were recorded in the nickel, pulp, aluminium and petroleum markets.

But the panorama was cloudy last year for the markets of temperate zone products and for tropical agriculture in general.

All agricultural prices declined in 1999, with major losses especially for soy, dragging with it other oleaginous crops, as well as cotton and fodder grains. The same trend was recorded for the pork and poultry markets.

As far as beef trade, the UNCTAD survey recognises that the crisis arising from “mad cow disease” (BSE -bovine spongiform encephalopathy) constitutes a serious challenge for Europe and warns that the disease will continue to occupy the world’s attention for years to come.

Last year, farm product prices remained low, but the UN agency indicates that some optimism for a recovery in 2001.

The worst commodities performance was again recorded among tropical products, which play an important role in the economies of Africa, the Pacific and in many Latin American and Caribbean countries.

Sugar provides the best example of this trend. The price for this product fell below production-costs in most of the sugar- producing countries.

One of the reasons for this dynamic is found in the rise of sugarcane production in Brazil, the country experts blame for the over-supply of sugar on world markets in the last few years.

But the phenomenon as also due to the protection of the sugar industry applied in the United States and in the European Union (EU). Sugarbeet farmers from these two economic super-powers receive a subsidized price that is nearly four times the international price.

The situation of the tropical farmers is also discouraging due to the disappearance of the international systems for commodity price stabilisation.

Stabilisation mechanisms created 30 years ago have been dismantled, such as the International Monetary Fund’s Compensatory and Contingency Financing Facility and the European Union’s STABEX for agricultural commodities and SYSMIN for mineral products.

With an eye to the future, economists Abdelaziz Megzari and Olivier Matringe, the UNCTAD report’s editors, commented that they were interested to see how the new “globalised” companies play out – those being created through mergers and acquisitions – because they will be the source of new international networks.

Nevertheless, with the exception of petroleum, commodities will not have much weight in these events compared to the large-scale mergers and acquisitions involving banks and information technology (IT) corporations.

The IT revolution is radically altering how price formation takes place, erasing the barriers between futures markets and over- the-counter (OCT) markets, according to the economists.

Several countries of the developing South are developing their own futures markets, as in the case of India, while new international trading sites are also appearing on the Internet for steel, chemicals and other products.

The world is “gradually arming itself with new tools” that allow more-exact instruments for measuring “the profound instability or total uncertainty of markets” that reflect world tensions, says the UNCTAD survey.

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