International agency chiefs call for attention to commodity price hike

Volatile and rising prices for basic farm produce, petroleum and raw industrial materials are a cause for concern, especially for the poor of the world, and steps are needed to calm historically turbulent commodities markets, the heads of several international agencies said.
UNCTAD’s second Global Commodities Forum (GCF) opened with addresses by the chiefs of four international agencies and the deputy executive secretary of a fifth. They said the theme of this year’s forum – 'Volatility in international commodity markets' – is timely as prices for such basic products are edging upward towards the limits reached during the 2008 food and energy crises.
UNCTAD secretary-general Supachai Panitchpakdi said that there are serious concerns about the way in which commodity markets have been evolving in recent years. "Since mid-2010, commodities have, for the second time in three years, been experiencing extremely high price volatility," he said, warning of 'speculative distortions that complicate the economic management of commodities production and trade,' and noted that natural events such as floods in Pakistan and fires in the Russian Federation, events which may be linked to global warming, have spurred upward pressure on prices for agricultural goods such as wheat and cotton.
Copper prices, he said, have risen by 35 per cent since the summer of 2010. These forces come on top of basic increases in demand fuelled by the fast-growing economies of such countries as China. "Such volatility has huge negative impacts on vulnerable groups, such as low-income households in developing countries, for whom food expenditure can account for up to 80 per cent of household budgets,” he added.
Panitchpakdi urged greater efforts to 'identify the policy levers that can rein in excessive volatility and maintain prices within a reasonable band'. He also urged commodity-dependent developing countries to continue efforts to diversify their economies so that they are less vulnerable to shifts in commodities markets.
Pascal Lamy, director-general of the World Trade Organisation (WTO), cautioned that '2011 will see the prices of most commodities rise, as the rise in global GDP bolsters demand, led by emerging economies. Global GDP is set to grow by four per cent this year.'" Over 70 per cent of the growth will come from commodity-intensive emerging markets. China, India and Latin America, in particular, will be acting as a ‘pull’ for global commodities," Lamy said, adding that that 'volatility is at its worst in tight and closed markets. It eases in open and, hence, deeper markets.
"Completion of the Doha Round of global trade talks could calm the picture, he added. "In fact, were this round to be completed, least developed countries (LDCs) would get almost entirely duty-free, quota-free access to developed world markets."
Hamadoun I Touré, secretary-general of the International Telecommunication Union (ITU), termed 'the timing of the forum especially important. "For billions of people, the cost of meeting daily food needs takes up a 'significant proportion' of family incomes," he said. "We must therefore work together to ensure the long-term sustainability of the production and marketing of commodities.
"Careful monitoring of these markets is vital, Touré said, and to that end ITU and UNCTAD had signed last year an agreement to set up and run a Natural Resources Information Exchange for African countries.
Ali Mchumo, managing director of the Common Fund for Commodities (CFC), said, "The recent developments in the commodity markets have been a subject of intense attention and discussion by the members of the CFC and all the stakeholders of commodities with whom we interact daily in our projects.
"The challenge, Mchumo said, is to find 'practical workable solutions to the perennial problems of the commodity economy.' He added, "There’s not much disagreement in the international community that commodity dependence is a development problem."
Andrey Vasilyev, deputy executive secretary of the United Nations Economic Commission for Europe (UNECE), said the world’s advanced economies are recovering only slowly from the global recession, with unemployment distressingly high.
Recent rises in commodity prices pose the possibility of contributing unwelcome inflationary pressure, and it is important to limit such prices to the forces of “supply and demand alone," Vasilyev said, and to reduce any influence coming from financial speculation in such goods.
UNECE’s internationally agreed standards for a number of agricultural products are applied in many cases worldwide and help to reduce trade barriers and improve the prospects of farmers in developing countries, he noted.
Opening the session was Luis Manuel Piantini Munnigh, president of UNCTAD’s Trade and Development Board, who told the gathering that the two-day conference is part of 'a search for better solutions for the chronic problems of the commodities economy'.
He said it is important 'to address these chronic problems in a manner that is both systemic and systematic, seeking the best ways to solve them'. The GCF will continue over the next two days with a series of discussions in three parallel 'streams'.
Topics to be covered include 'The state of energy markets: lower volatility and a new price zone for hydrocarbons?'