Tweet

1.4 World prices for African commodities: Economic Report on Africa 2007

Guest post by: United Nations Economic Commission for Africa

Article Overview: Commodity prices on the increase

1.4 World prices for African commodities: Economic Report on Africa 2007

Global demand for oil and minerals has grown fast due to global growth, especially
driven by China’s high performance. Between 2002 and 2005, the UNCTAD price
index for non-fuel commodities rose by 45 per cent, with minerals, ores and metals
prices increasing by almost 100 per cent and crude oil by 114 per cent (table 1.1).
As a result, commodity prices have remained above their long-term trend. Prices
of metals, minerals and oil are expected to stabilize in 2007 but remain elevated
(UNCTAD 2006a; World Bank 2006b).

These price hikes were also partly driven by slow supply reactions, especially bottlenecks
in refining and storage of crude petroleum, and political instability in the
Middle East. In general, investments in mineral extractions have relatively long gestation
periods and producers have become more conservative in their investment
plans. In 2005, the depreciation of the dollar also contributed to the rise in commodity
prices. Other supply-side factors have been disruptions in supply caused by
labour disputes and rising production costs due to higher energy costs and the need
to undertake exploration in areas that are less accessible (UNCTAD 2006a).

To some extent, exporters of minerals were able to improve their external accounts
and offset the negative effects of high oil prices on terms of trade. For example, in
Zamibia total exports increased from $US919 million to $US2,095 million between
2002 and 2005. The country depends heavily on copper, which accounted for 57 per
cent of total exports in 2005. The surge in copper prices has significantly contributed
to Zambia’s growth rate of more than 5 per cent in the past three years (UNCTAD
2006a; EIU 2006b; IMF 2006).

On average, prices for food and tropical beverages rose by 26 per cent between 2002
and 2005 and those for agricultural raw materials increased by 41 per cent. The
highest increases were registered for rubber (96 per cent), coffee (87 per cent), rice
(50 per cent), sugar and logs (44 per cent). This was partly driven by supply-side
problems due to adverse weather conditions, plant diseases and pests in Asia and
Latin America. There is also a long-term trend as some agricultural commodities are
increasingly used as substitutes for oil, namely rubber, sugar and grain. The latter
can also be converted into bio-fuel. In 2006, tea prices further increased by 14 per
cent due to a drought in Kenya and coffee prices also were 18 per cent higher than in
2005. The increase in timber prices by 14 per cent is mainly driven by high demand
from China.

Thus, the trend in commodity prices will depend on future growth of the world
economy, specifically in China, which has absorbed more than half of global growth
in the consumption of such commodities as cotton and soybeans. It has to be noted
that not all commodity producers benefited from higher export earnings. The prices
of some agricultural commodities declined between 2002 and 2005. For example,cocoa prices declined by 14 per cent while those for hides and skins declined by 20
per cent (UNCTAD 2006a; World Bank 2006b).

Related Articles
  V. D. The Future of China-Africa Economic Relations: FACTORS INFLUENCING THE GROWING TIES
  4.0 Diversification trends in Africa: Economic Report on Africa 2007
  II.a Merchandise Trade: TRADE AND CAPITAL FLOWS BETWEEN CHINA AND AFRICA
  Overview II: Economic Report on Africa 2007
  Wall Street, “Africa is Investing’s Final Frontier”

Article Tags: agricultural commodities, China, China, commodity prices, commodity prices, copper prices, global growth, global growth, minerals, oil prices, UNCTAD



Related Forum Posts
Seeking advice on working procedure of Convenience Store Fra - I have some queries about the working of the franchises. How does the relationship between the Store Owner, Suppliers and Corporate works exactly? How does the store owners get reimbursed when they sell commodities like coke in fewer prices than others?
Re: Newbie from Africa - [quote="Evan":22gvtxlq]Welcome to the forums Biiyke! You asked if we know any sellers who were trying to reach the African market... I think you'd honestly have more luck going the other way - try to find sellers in Africa and sell to the rest of the world.[/quote:22gvtxlq] Hello Evan, You are absolutely correct.Thank you for your advice.That's actually the whole idea,Africa to the world and the world to Africa. So I will throw more weight on that area.
Re: How will an african make money truely on the net? - Is it possible for an African business to set up an "offshore" account in the US or England... or even Switzerland... where all monies are paid? And a trusted agent there, who gets a percentage of any money, can then take that money from paypal and wire it or mail it or whatever to an African bank? There are lots of countries in Africa, is this a problem in all of them? Seems like an internet entrepreneur who can set up a "Paypal" like company of their own might be able to make money on this... ? Course you'd need governmental contacts...
Re: Newbie from Africa - [quote="MichelleJ":1mn7d7fx]Hello Biiyke Welcome to the forum. Which part of Africa are you from it is quite a big continent? I live in South Africa. MichelleJ[/quote:1mn7d7fx]Hello MichelleJ,Nice to hear from you.I live in Nigeria.I am also trying to reach the South African market because I know You guys have a lot of unique stuff to show the world!
Re: How will an african make money truely on the net? - [quote="OmnivoreInk":koqfopnc]Is it possible for an African business to set up an "offshore" account in the US or England... or even Switzerland... where all monies are paid? And a trusted agent there, who gets a percentage of any money, can then take that money from paypal and wire it or mail it or whatever to an African bank? There are lots of countries in Africa, is this a problem in all of them? Seems like an internet entrepreneur who can set up a "Paypal" like company of their own might be able to make money on this... ? Course you'd need governmental contacts...[/quote:koqfopnc] Hi Topeyinka I don't know what products you sell, but if they are digital how about selling them through Clickbank. They will handle the sale for you and will send you cheques on the money you have earned. MichelleJ


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Basic Operating Question (BOQ) for Empowerment

Winning Market Share in a Tough Economy

The State of the Sustainable Furniture Industry

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.