CHAPTER 2
International Commodity Prices, Exchange Rates, and Producer Prices Anil Onal and M. Ataman Aksoy
International price developments are important for the success or failure of agricultural policy reforms. Price increases after policy reforms may ease the adjustment to a new equilibrium, whereas price collapses after a reform may jeopardize the whole program. In addition, high price volatility can impair longer-term commitments by farmers and, thus, lower long-term growth rates. Commodity prices increased during the early 1990s, when most agricultural policy reforms were implemented in SubSaharan Africa (SSA). Then, during the early 2000s, prices collapsed for most of the products affected. In most evaluations undertaken during the early 2000s, these price developments were not taken into account. This chapter documents the behavior of commodity prices, international and domestic, and the timing of their increases and collapses between 1990 and 2008. Particular focus is placed on the transmission of international prices to domestic producers for our sample country/ commodity combinations (nine SSA and three Asian cases). The extent to which international price volatility is reflected in domestic producer prices is examined first. Volatility can be caused by changes
The findings, interpretations, and conclusions expressed herein are those of the authors and do not necessarily reflect the views of the World Bank and its affiliated organizations. 51