Impact of World Commodity Prices on Developing Countries

Primary commodity prices and markets behave differently from those of manufactures of most services, Prices have fallen over time, and countries and producers dependent on them find income not keeping pace with costs of production or of imports. The fluctuations in prices in response to 'normal' changes in demand and supply are larger than in other prices, and some prices are subject to unpredicatble and uncontrollable shocks from weather or new discoveries. Countries which remain primary producers need support because they are poor and lack the resources to cope with these falling and unstable prices. Those countries which have managed to diversify, and reduce their dependence on the primary products, have been more successful in development terms. Aid policies should be designed to encourage such diversification.