Economic Papers

1 primary work

Declining Agricultural Commodity Prices

by Euan Fleming, D. S. Prasada Rao, and Pauline Fleming

Published 1 May 2006

What are the best strategic options for developing country governments to improve rural living standards through agricultural growth? Tropical commodities such as coffee, sugar and rice are experiencing a long-term decline in prices. This presents a particular problem for producers, since these commodities have traditionally formed the core of agricultural exports of most developing countries since the 1960s.The European Commission has argued comfortingly that declining prices are driven mainly by productivity gains, but the analysis presented here suggests otherwise. Instead the authors find evidence that the difference in productivity levels between countries is increasing, with some falling further and further behind. Diversification into higher value-adding agricultural industries will be difficult without dramatic improvements to rural infrastructure and institutional support. Since these improvements are unlikely to be achieved, the authors conclude that the major objective for agricultural producers in developing countries must remain productivity gains in existing commodity industries.