Global Commodities Forum to ponder how to turn Farm goods, raw materials into higher living standards

15 March 2013

Experts will gather on 18 and 19 March at the UNCTAD Global Commodities Forum 2013 to review what happened, and to discuss how the commodities boom can be harvested to yield better benefits for the poor as well as more durable, broad-based economic growth for developing countries.

For decades, the basic farm goods and industrial raw materials that underpin the economies of many poor countries sold at low and volatile prices on world markets. Development experts and government officials lamented that these low returns kept nations in Africa, Asia and Latin America from expanding their economies and reducing poverty.

Since the end of 2002, however, commodities prices have staged an unprecedented and long-lived boom - yet the windfall, while contributing to notable increases in gross domestic product (GDP) in a number of countries, especially in Asia, has been less significant in other countries, and has not led in those cases to other economic progress that was hoped for, such as economic diversification. In the countries that have done less well, there have been disappointingly small declines in poverty rates.

The theme of this year's Forum is "Recommitting to commodity sector development as an engine of economic growth and poverty reduction".

Since the 2008 food crisis, when prices rose sharply, major food commodities such as wheat, maize and rice have registered significant additional price increases. Prices for wheat and rice climbed 170 per cent between 2000 and 2012, and the price of maize rose by more than 200 per cent. Non-oil commodity price indices remained at historic heights in 2012, some 2.4 times their average during the period from 1960 to 2012. The price index for minerals, ores and metals was at about three times the average level for 1960-2012, and crude petroleum and gold prices continued to break records in 2012. Crude oil averaged $105 per barrel, and gold sold at an average of $1,670 per troy ounce.

World commodity exports increased fivefold from 1995 to 2011, and world commodity trade as a share of total merchandise trade reached 33 per cent in 2011, compared to 24 per cent in 1995.

Given that low-income countries have registered an average growth rate of about 5 per cent per annum over the decade 2002-2012, the commodities boom since the end of 2002 has certainly benefited these countries. However, the impact of the boom on poverty levels remains questionable. Among the so-called commodity-dependent developing countries (CDDCs), gross domestic product tripled between 2000 and 2011, and poverty levels from 2002 until 2008 - the latest year for which conclusive figures are available - fell by 28 per cent. But those figures mask less encouraging performance in some nations. Many CDDCs are also classified as least developed countries (LDCs), and even during the global economic boom, the rates of extreme poverty in LDCs only declined from 58 per cent in 2002 to 53 per cent in 2007 - and that was before the world food and financial crises. The World Bank has since estimated that the recent resurgence in food prices, which in 2011 reached levels approaching their 2008 peaks, pushed an additional 44 million people worldwide into extreme poverty. It is an irony that a number of CDDCs, especially in Africa, are net food importers. In addition, it appears that much of the growth experienced by these countries has been jobless.

The boom in prices does not appear to have led to much economic diversification in CDDCs, either. From 2002 to 2010, the number of CDDCs increased from 85 to 91. UNCTAD Secretary-General Supachai Panitchpakdi told the opening session of the 2012 Global Commodities Forum that "while we have been trying to find ways to advise countries to be less commodity-dependent, CDDCs have actually become more heavily dependent on commodity exports."

Experts say that one of the lessons of the commodities boom is that high prices aren't enough. Governments must combine the returns they get from commodities with astute and well-coordinated strategies to diversify the goods that their countries produce and to upgrade basic farm goods and raw materials into finished products that command higher prices and create greater numbers of jobs. Economists and development specialists also contend that developing countries and the international community must devote greater attention - including research and development - to agriculture, after years of neglect of the farming sector. They say that particular emphasis should be placed on crops and on methods that can be used by smallholder farmers. In addition, cooperative efforts, perhaps led by governments, must be re-established to help smallholder farmers band together to obtain inputs and to market their harvests. Reforms carried out in the 1980s and 1990s under the laissez-faire economic doctrine of the time abolished many government programmes for farmers. More efficient free-market substitutes for these institutions did not arise as had been predicted.

Frequent fluctuations in commodities revenues do not allow for long-term planning and management that is compatible with sustained growth and development and with reductions in poverty. The extractive sector, in particular, is technology-intensive, and therefore has limited capacity for job creation and poverty reduction. To address this in their energy sectors, many companies have implemented social and community investment programmes in the areas in which they operate.

Corporate commitments to enhancing shared prosperity and sustainable development for CDDC populations are considered important for attracting investment and for creating greater employment, including a broader variety of jobs. Because it takes time to demonstrate sustained impacts, such companies have stressed the importance of seeking a balance between small, tangible outcomes in the short term, and longer-term, sustained positive impacts on living standards.

The energy industry is seen as having the potential for helping host countries create greater linkages between extracted raw materials and their upgrading along domestic supply chains. Steps are envisaged that can foster local entrepreneurs and local enterprises and can help in the transfer of skills and technology. Firms such as Total, GDF SUEZ, and Gas Natural Fenosa are involved in such efforts.

The Global Commodities Forum will open on 18 March with addresses by UNCTAD Secretary-General Supachai Panitchpakdi, World Trade Organization Director-General Pascal Lamy, and UNCTAD Trade and Development Board President Jüri Seilenthal of Estonia.

The keynote speakers at the opening session are:

  • Professor Michael Lipton of Sussex University (United Kingdom): "Staples production; efficient 'subsistence' smallholders are key to poverty reduction, development, and trade"

  • Ruth Rawling, Vice-President of Corporate Affairs for Europe, the Middle East and Africa, of Cargill: "Lessons from experience; unlocking farmers' potential, enabling entrepreneurs"

  • Dhano Sookoo, President of the Agricultural Society of Trinidad and Tobago: "The role of farmers' organizations in promoting commodity development and poverty reduction"

Among plenary themes to be considered through panel discussions and open debate over the two-day Forum are:

  • Risk management and resilience: methods and mechanisms for developing countries and small producers to prosper in spite of price volatility in commodities markets.
  • Playing catch-up in the agricultural sector: Investing in neglected infrastructure and services in the agricultural sector; filling the void left by the elimination of parastatal institutions.
  • Improving transparency in commodities markets and value chains.
  • Challenges and solutions in collecting, analysing and disseminating market information and other commodities data.

Forum partners are the United Nations Economic Commission for Europe Gas Centre, Gasnat, and AFREXIMBANK.