Abstract: This paper describes key developments (demographic changes, technological progress, changing domestic and international market structures, and the changing nature of consumer demand) which are affecting commodity markets, and discusses what these developments imply for the process of commodity price formation and thebenefits that developing countries can draw from their commodity sectors. Among other things, it is found thatin response to declining margins in international trade, international commodity trading houses, which accountfor a major part of international trade, have become fewer, bigger and more diversified across the range of commodities, and more vertically integrated upstream to the farmers' level and downstream in transport and processing. Although ultimately this makes local markets more efficient, local farmers and traders are often poorly equipped to deal on an equal footing with these large trading houses, particularly after the abolition of state marketing boards in many countries. Stimulating at a national level the same developments which have reduced margins in international trade (namely widening access to information and growing efficiency of markets, including for credit provision) would partly allow this imbalance to be redressed.It is stressed in the paper that, after years of heavy government intervention, new market institutions do note merge from one day to the next, but need to be promoted and nurtured. Various policies which may merit consideration are discussed. Furthermore, the paper notes that many of the fundamental forces which shape the market, and will continue influencing it in the years to come, are still poorly understood; several issues on which further research and analysis may be worthwhile are listed
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International Institute for Trade and Developement : UNCTAD Collection
