Showing papers on "Commodity published in 1979"

Estimating Consumption Parameters for Food Policy Analysis

Abstract: Food policy analysis links nutrition objectives to macroeconomic policies and performance. At the heart of the analysis is a matrix of price and income elasticities that must be incomestrata-specific. Obtaining this matrix for aggregated income classes requires a blend of complex theory and sophisticated econometric analysis that is only possible with restrictive assumptions about the separability of the impact of price changes for one commodity class on changes in demand for other commodity groups. The separability assumptions are not overly restrictive in the context of such highly aggregated commodities as food, housing, or clothing. But when important nutritional effects occur due to substitution of one quality of wheat for another, or the substitution of cassava for rice, then the level of commodity detail needed to reproduce accurately the impact of relative price changes forecloses the "econometric" approach even for combined income classes. Obtaining the full matrix for disaggregated income classes requires a new approach and this paper reports one attempt.

A ‘Stages Approach’ to Comparative Advantage

Abstract: The purpose of the paper is to analyse the changing pattern of comparative advantage in the process of economic development. The investigation will be limited to exports, since the commodity pattern of imports is greatly influenced by the system of protection in the importing countries. And as trade in natural resource products depends to a considerable extent on the country’s resource endowment, we will deal with comparative advantage in manufactured goods alone.

Import Tariffs and Price Formation in the World Wheat Market

Abstract: A theoretical analysis of price formation in the world wheat market has been presented by McCalla; Taplin; and Alaouze, Watson, and Sturgess. McCalla and Taplin based their models on a duopoly arrangement between the United States and Canada. These models were extended by Alaouze, Watson, and Sturgess to include Australia, and a theoretical model of triopoly pricing in the world wheat market was developed. Canada is assumed to act as a price leader in the triopoly, and it is concluded that producer prices in wheatexporting countries will be higher under triopoly as opposed to duopoly pricing. The major thrust of these papers is that price formation in the world wheat market is largely determined by the major exporters. The purpose of this paper is to suggest and empirically test an alternative hypothesis; namely, that world wheat prices are essentially determined by the major wheat importers. Two major importers-Japan and the European Economic Community (EEC)-are used as the focal point for the analysis. The authors believe the world wheat market is usually a buyer's rather than a seller's market. By arguing the market is usually dominated by buyers, it is recognized that there are periodical exceptions to the argument over time, the major one being the commodity boom period of 1973-74. It is well known that the major importers are restricting trade in wheat. This paper suggests that the restrictive policies of the importers (whether consciously or not) are likely to result in a welfare gain to importing nations greater than that under free trade. This suggests that perhaps importing countries are using tariffs in an optimal sense (where all sectors of society are taken into account) rather than merely using them to protect domestic producers from low-priced competitive imports. This is not to argue that a duopoly or triopoly structure does not exist among the United States, Canada, and Australia but rather that the effect of such arrangements is minor relative to the buying power exerted by importers. Although this paper focuses on the world wheat market, the framework of analysis has application to other agricultural markets as well.

Global Bargaining: UNCTAD and the Quest for a New International Economic Order

Abstract: Negotiations on an international commodity policy have been the central issue on the North-South agenda for the past three years. They also can be seen as the first major effort to give substantive meaning to the Third World's desire not only for a new regime for the world's raw commodity trade but also for a New International Economic Order. Yet various obstacles have impeded successful North-South bargaining, and the negotiations remain at a stalemate. Focusing on the bargaining process between developed and developing countries in the United Nations Conference on Trade and Development, Robert Rothstein analyzes the factors that have inhibited successful negotiation and suggests ways in which these obstacles might be removed. The first part of the book focuses on the specifics of the commodity debate, while in the second part the author attempts to explain the causes of delay, misunderstanding, and mistrust within the negotiating process. Assessing the possibility of devising an effective bargaining policy among unequal parties with conflicting values and interests, Professor Rothstein suggests a number of structural, institutional, and conceptual reforms. Originally published in 1979. The Princeton Legacy Library uses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These editions preserve the original texts of these important books while presenting them in durable paperback and hardcover editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.

Preferential Trading Theory: The n Commodity Case

Abstract: This is a general equilibrium analysis of preferential trading. A method was developed which allows the analysis of the many-good case and which suggests the tools for empirical studies. It is shown that increasing the number of commodities beyond two introduces new considerations. It is, however, always possible to identify welfare-increasing tariff changes. The study analyzes the inter-relationship between preferential trading and a unilateral movement to free trade. The effect of a customs union on income distribution among union members is emphasized.

The Influence of Domestic Pricing Policies and Buffer Stocks on Price Stability in the World Wheat Industry

Abstract: Domestic pricing policies are a major cause of instability in international commodity markets. The modification of such policies could be a viable alternative to buffer stocks in providing stability. A theoretical model of price intervention is developed to show how common forms of intervention destabilize the world market price. A stochastic econometric model is used to show, first, that most countries in the world wheat market have policies which destabilize the wheat market, and, second, that the modification of such policies would prove as effective as a buffer stock policy in stabilizing the wheat market.

The Cartelization of World Commodity Markets

Abstract: The cartelization of world commodity markets is not a new phenomenon. In a historical survey of the experience of some international commodity cartels, Paul L. Eckbo shows that at one time or another there has been an attempt to cartelize the market for most of the major internationally traded commodities. The large majority of these attempts at cartelization, however, were failures-the cartel either dissolved after a short period of time, or in some cases the cartel remained in force officially, but had little or no real impact on price and member revenues. Of the fifty-one formal cartel organizations documented by Eckbo, only nineteen could be considered successful in the sense of being able to maintain a price significantly higher than what it would have been in the absence of agreements. But even the successful cartels were limited in their durability; the average lifetime of the formal agreements was about five years, and only five of the nineteen cartels lasted ten years or longer. What is new is the growing concern that the prospects for successful cartelization have suddenly become greater, and that in the future, world commodity markets are likely to be increasingly dominated by cartels. Much of this concern, of course, has been the result of the Organization of Petroleum Exporting Countries' (OPEC) spectacular success in quadrupling world oil prices, and the International Bauxite Association's (IBA) success in tripling the price of bauxite. Warranted or not, this concern now casts a shadow over predictions, policy prescriptions, and proposals for the international "management" of commodity markets. Buffer stocks and other instruments for price stabilization, for example, become the vehicles for cartelization and the establishment and maintenance of the monopoly price. And for some, cartelization, or more specifically, an implicit or explicit transfer of monopoly and monopsony power from developed to developing countries, is an essential and justifiable component of the New International Economic Order (NIEO). ' Given the historical success record of international cartels, is there any reason to expect new attempts at cartelization to succeed where similar attempts in the past have failed? Has the structure of world commodity markets-or the environment surrounding them-changed in such a way as to better facilitate the formation and success of cartels, so that over the next decade we are likely to witness a proliferation of international cartels that will succeed in raising the prices of a large number of key commodities? There are no simple answers to these questions. While the interest in cartelization on the part of some LDCs may indeed be greater, there appears to be no clear change in the structure of commodity markets that would facilitate their cartelization. It is difficult to agree with C. Fred Bergsten's assertion, for example, that the environment has shifted to one in which supplies of raw material commodities are shrinking as demand keeps growing, thereby encouraging cartelization. In the past some cartels succeeded while others failed for reasons specific to each market and to each cartel configuration. As a more recent example, IBA succeeded while CIPEC, the copper cartel, did not-and

The Processing of Primary Commodities: Effects of Developed-Country Tariff Escalation and Developing-Country Export Taxes

Abstract: Both DC (developed country) tariffs and LDC (developing country) export taxes are "escalated" to protect local processors of primary commodities. The paper develops an analytical model of north-south commodity trade which is used to estimate the effects of reciprocal elimination of these trade barriers for eight commodities. It is estimated that processing would increase by 9 percent in the LDCs and decline by less than 1 percent in the DCs. The LDC export revenue for the eight-commodity sample would increase by 11 percent, or just over $1 billion (based on 1973 trade flows), which is considerably more than the estimated effect of the Generalized System of Preferences.

Modern agricultural technology and income distribution: The market price effect

Abstract: This article shows how the price effect influences the distribution of benefits from modern agricultural technology among groups in society. Quantitative estimation procedures and empirical evidence of the distributional effects are shown. Available empirical evidence shows that the distributional pattern is greatly affected by commodity selection and technology specification. In general, it appears that modern agricultural technology benefits the consumers, particularly those with low incomes, and better-off farmers while smaller farmers producing under adverse production conditions have been the most likely losers. It appears that social benefits from modern technology generally have been sufficient to compensate losers. However, compensation has not usually been made. It is suggested that modern technology be developed and introduced in close coordination with facilitating, corrective or compensatory public policy to fully exploit the potential of such technology in society's best interest. More country and/or project specific ex ante analyses are needed to guide such public policy and priority setting in research.

The Role of Government Interference in International Commodity Trade Models

Abstract: The fact that governments intervene in both domestic and international commodity markets is well recognized by market analysts and policy makers. Current GATT negotiations are addressing the consequences of such interventions for international trade, and the U.S. chief negotiator, Robert Strauss, reports that trade restrictions on agricultural commodities represent a particularly difficult stumbling block ("Chief U.S. Trade Negotiator at Geneva . . ."). The interest in international commodity agreements and market stabilization also indicates a concern for the behavior of these markets and particularly for the consequences of and potential for intervention in these markets.

Game involving the dealing in commodities

Abstract: A game of commodity trading having a world map with a plurality of circles and disks placed on the circles corresponding to different commodities. A command die, a quantity die, a commodity die and a market price setting spinner are used in play of the game. The players start by rolling the commodity die, picking a corresponding disk and buying a corresponding commodity until all disks are gone. The disks have letters on them and the players form words from the disks. The market price spinner is then used to set the market price for the commodities. The players then throw the three dice and follow the dice directions. The winner is the player with the most money at the end of the predetermined time.

Appropriate techniques for use in the assessment of country loss in stored produce in the tropics

Abstract: The techniques for estimating loss are not universally applicable and when an investigator is required to assess the losses in several commodities in a country there is a need for determining priorities of the commodity to be studied and of the areas in the country where investigation should take place. An approach to this is described.

Changing Patterns of World Trade

Abstract: Commodity forecasting is a risky but often highly profitable business for private traders It is equally risky, in a different way, for public officials and never profitable since most people tend to remember the public official's errors and forget the times he was correct Thus, I shall avoid forecasting and instead examine likely future trends based upon some facts, some extrapolation of the trends of the last three decades, and some personal observations which may be subject to difference of opinion For two reasons I will focus my comments on a few widely traded agricultural commodities in which the United States has a major interest One is that these are products about which I presume to have some knowledge; the second reason is that the nature of production, storage, and consumption of these agricultural commodities differ sufficiently from other primary commodities to warrant separate treatment Even with these limitations, I would hope to be able to evoke some useful discussion and thought about future problems and policy issues The basic points I hope to make are (a) trade flows in many of these commodities have changed drastically in the past three or four decades; (b) the behavior of countries which play an increasing role in commodity trade results in greater uncertainty and instability in world markets for most of these commodities; (c) traditional adjustment mechanisms no longer function satisfactorily and as a result the adjustments fall on relatively small groups; and (d) given these circumstances and the unwillingness or inability of certain groups to tolerate the prospective situation, new institu-

Importance of understanding consumption dynamics in market recovery periods

Abstract: Periods of reduced supplies due to exogenous shocks and subsequent high price levels have occurred for many agricultural commodities in the past decade Consumers' adjustments to these events depend on the magnitude of the shocks and characteristics of the commodity Understanding consumers' responses to these events requires recognition of rigidities that result in delays in consumer responses to pricesRecognition of rigidities in consumption relationships by using dynamic stock and flow adjustment models was popularized by Houthakker and Taylor [2] The models recognize the role of inventories and habits resulting from previous purchase patterns in determining current consumption decisions

A Modeling Approach to Flows of Funds in Localized Financial Markets

Abstract: tered simultaneously increases in loan demand and changes in competition and saver behavior that have increased the cost and reduced the supply of loanable funds obtained as deposits from local sources. To evaluate the impact of such changes in the competitive environment of the banking industry or in regulations that affect banking structure, it is essential to determine the impact of those changes on the flow of funds in local markets. Yet the determinants of and factors influencing funds flows within and between local markets are not well understood. Numerous studies have been completed, for example, on the implications for competition and funds flow of changes in bank structure regulations (Mote, Guttentag and Herman). Most of these studies have been descriptive, with limited recognition of either the supply of and demand for funds in various markets or the transactions costs of management constraints that would impede or encourage funds flows between markets and regions. In addition, one of the striking characteristics of these studies is the inconsistency of their results. For example, some analysts indicate that changes in branch banking or holding company regulations result in a decline in lending activity for farmers, and thus a flow of funds from rural to urban areas (Lee and Reichert, Sullivan). Others indicate that changes in bank structure result in increased lending activity with local borrowers, including farmers (Snider, Rosenblum, and Eisenbeis). Spatial allocation models that explicitly incorp rate supply and demand functions have been used widely in the agricultural sector to analyze commodity flows between various markets and geographic regions as well as the implications of government intervention on such flows (Heady and Srivastava). The purpose of this article is to examine the potential for use of spatial allocation modeling techiques to evaluate the flow of funds within and between local financial markets. The unique structural dimensions of the methodology will be reviewed, data needs for related empirical work will be discussed, and an evaluation will be presented.

Quantitative Evaluation of Stabilization Policies in International Commodity Markets

Abstract: commodity markets. The "commodity boom" of 1972-75, and the rapid rise in grain prices in 1973-74 generated political pressures in both developed and less developed countries (LDCs) for commodity market control. The 1974 World Food Conference in Rome had as one of its themes the establishment and management of international reserve stocks to stabilize grain markets and provide food security. The 1976 meetings of the United Nations Conference on Trade and Development (UNCTAD) in Nairobi were dominated by a proposal to introduce an integrated program for commodities (IPC). This program has as its central point the creation of an extensive series of international commodity agreements to act as market stabilizers. Such developments have stimulated the interest of economists, who have sought to examine the issues raised from both theoretical and empirical perspectives. The purpose of this paper is to discuss briefly the major approaches that have been adopted in the empirical analysis of stabilization policy, to identify their advantages and disadvantages, and to indicate some important analytical questions that arise in the modeling of instability. The primary focus is on agricultural commodities, but methods and problems discussed are not confined to these alone.

Econometric model and futures markets commodity price forecasting

Abstract: Division of Agricultural Sciences L~IVERSITY OF CALIFORNIA Working Paper No. 72 ECONOMETRIC !' ltvKlDlTY PRICE FORE CASTING by Richard E. Just and Gordon C. Rausser Ca1ifornia Agricu1tura1 Experiment Station Giannini Foundation of Agricultural Economics September 1979

A Regulator's Perspective on Regulatory Research

Abstract: sources to developing a better understanding of the costs as well as the benefits of regulation. This will enable the political system to formulate regulatory policy more responsibly and it will help regulatory agencies implement that policy most efficiently. I am pleased to be invited to participate in this conference as I firmly believe that the application of economic analysis to this relatively new area of public policy has the potential for high social returns compared with other areas of work. When I came to Washington from Oregon State University nine years ago, I had little interest in regulation and no teaching or research experience. I soon learned that regulation was a priority area of work at the Council of Economic Advisers. The Council was active in advocating less regulation of surface freight transportation, commercial airlines and natural gas production. The Council was also conducting analysis of the newly-emerging environmental regulations. I first was exposed to the Council's regulatory analysis while I was on the staff. After I became a member, a major part of my responsibility was to coordinate the Council's regulatory analysis and represent the Council inside and outside government. Unfortunately, the amount of work which was needed greatly exceeded the capacity of the Council's small staff of two professionals in this area. This was especially true since new regulatory programs and requirements were proliferating rapidly in the early 1970s. During the past four years I have been deeply involved in establishing a new regulatory agency which oversees commodity futures trading. My remarks today, therefore, will be from my experience as a regulator-from the inside, so to speak. The Commodity Futures Trading Commission (CFTC) was created by Congress in 1974 when commodity markets were exceptionally turbulent. In addition, establishing new federal regulatory programs was fashionable during this period. Even though Congress is more skeptical about starting new regulatory programs today, I believe they would have to establish the CFTC now if they had not already done so. I know Congress considers effective regulation of futures trading to be desirable and essential for the protection of the hedging and pricing functions of futures markets as well as for the protection of those who use the markets. Let me make four general observations based upon my experience as a CFTC Commissioner. I hope my perspective will help you determine how to get a handle on regulatory research, which is not an easy task.

Simulation analysis of an international buffer stock for Jute

Abstract: This paper deals with the problems and prospects of organising an international buffer stock for raw jute. Such a study is important for several reasons: (1) Instability of this commodity has had a severe impact on one of the least developed economies, Bangladesh; (2) With exports concentrated in a single country prospects for organising a buffer stock would seem to be good; and (3) Only limited econometric analysis of the jute market and its stabilisation prospects have appeared to date. Dealt with here are the nature of the jute market, prospects for organising a jute buffer stock, and the economic and financial implications of alternative buffer stock policies. The results confirm the suitability of this market for buffer stock stabilisation.