Mr. Eduardo Borensztein, Mr. Peter Wickham, Mr. Mohsin S. Khan, and Ms. Carmen Reinhart
This paper analyzes global commodity trends and concludes that the marked decline in real commodity prices of the past decade should be regarded as largely permanent and irreversible. The authors contend that the analysis of commodity prices should be extended to include the role of the breakdown of major international commodity agreements. In addition, the authors analyze how developments in the former Soviet Union have affected commodity supply conditions.
This paper highlights that on September 29, 1982, the International Bank for Reconstruction and Development (World Bank) began to offer discount notes under a short-term borrowing program approved by its Board last July. The Bank anticipates that in fiscal year 1983, it will have outstanding up to US$1.5 billion in short-term discount notes and that it will borrow about US$8 billion in the fixed-rate medium to long-term markets. The initial offering of notes is being made in the U.S. domestic markets.
The efficiency of the crude oil futures market and the forecasting accuracy of futures prices are investigated. The accuracy of forecasts using futures prices is compared with that of forecasts using alternative techniques, including time series and econometric models and judgmental forecasts. The predictive power of futures prices is further explored by comparing the forecasting accuracy of end–of–month prices with weekly and monthly averages, using different weighting schemes. Finally, the paper investigates whether forecasts using futures prices can be improved by incorporating information from other forecasting techniques. [JEL A10, C22, C52, E37]
Non-fuel primary commodity prices fell in the second half of 1989, breaking the upward trend that had prevailed in the preceding two years. The decline in the Fund’s index of non-fuel commodity prices from the first half of 1989 to the second half of the year was 7 percent in terms of SDRs and 8 percent in terms of U.S. dollars.1 By contrast, petroleum prices increased during 1989, reversing the downward trend of the previous two years. The Fund’s indicative petroleum price—an average of prices for U.K. Brent light crude, Dubai medium crude, and Alaska north slope heavy crude—rose on a year-to-year basis by 38 percent in SDR terms and 33 percent in terms of dollars during the second half of 1989.
Prices of food commodities, which began to recover in 1987, peaked during the first half of 1989. Since then food prices have weakened and are expected to weaken further in 1990. The aggregate index of food prices, after increasing by 23 percent in 1988, averaged a modest 8 percent rise in 1989 (Table 5). As a result, the index stood at its highest level since 1984, just prior to the long downward trend that bottomed out in the first half of 1987.
In contrast to the overall index of non-fuel commodity prices, which rose by 4 percent, the index of beverage prices fell by nearly 13 percent in 1989 (Table 6). The decline, which was the third in as many years, is largely attributable to supply factors. Increased production of coffee and cocoa in lagged response to the high prices of the late 1970s was the main factor contributing to the increase in the overall supply of beverages. After the sharp increase by nearly 11 percent in 1987, which reflected to a considerable degree the recovery of Brazilian coffee production from the severe 1985 drought, the index of world supply of beverages rose by a further 5 percent in 1988 and by 3 percent in 1989. World consumption of beverages is estimated to have increased by 2 percent per annum during these three years. As a result of the widening disparity between world supplies and consumption, the overall level of world stocks of beverages has increased during this period; the index of closing stocks rose by 37 percent in 1987, by over 8 percent in 1988, and by more than 5 percent in 1989.
The December issue of the Research Bulletin looks at “Seven Questions about Climate Change” (Rabah Arezki and Akito Matsumoto). The Research Summaries review “Winning the Oil Lottery: The Impact of Natural Resource Extraction on Growth” (Tiago Cavalcanti, Daniel Da Mata, and Frederik Toscani) and “Malaysia: Achieving High-Income Status through Resilience and Inclusive Growth” (Alex Mourmouras and Naimh Sheridan). The issue also includes regular updates on new IMF Working Papers, Staff Discussion Notes, IMF books, and the IMF Economic Review.