The Global Implications of Falling Commodity Prices

After all, energy is a global commodity.

Apart from commodity exports, it has little to offer to the global economy.

But this neglects global inflation driven by rising commodity prices, which has been increasingly evident.

China s 4 trillion stimulus package, unveiled in November 2008, restored confidence in global commodity markets.

And emerging markets will suffer once the US contraction and global slowdown undermines commodity prices.

Rising energy and commodity prices helped create the global food crisis, which fed the financial crisis.

As long as China s commodity demand grows at a higher rate than global supply, prices will rise.

Admittedly, the global commodity price boom has had profound, albeit enormously complex and uncertain, effects on poverty.

Ultimately, emerging economies absolute size and rate of growth both matter in charting commodity demand and the future trajectory of global commodity prices, with per capita income clearly linked to consumers wealth.

More consumption and less heavy industry will also reduce China s demand for raw materials, dampening global commodity prices.

Commodity export prices are at record levels, global liquidity has been ample, and international interest rates have been low.

If anything, inflation is now falling further globally as commodity prices adjust downward in response to weak global growth.

Today, a deepening global divide sets the slow growing US against many emerging market economies and commodity producing countries.

We know that as the cost of this commodity rise, so the growth rate of the global economy decreases.

Meanwhile, new energy extraction technologies, combined with a softer trajectory for global growth, are having a marked impact on commodity prices, cutting deeply into the surpluses of commodity exporters from Argentina to Saudi Arabia.

NEW YORK The decade long commodity price boom has come to an end, with serious implications for global GDP growth.

A general rise in global demand will simply spill over into higher commodity prices, with little helpful effect on consumption.

Indeed, demographically, Russia is undergoing a dramatic decline. Apart from commodity exports, it has little to offer to the global economy.

True, when today s global economic boom ends, as it inevitably will, commodity prices will plummet, easily 25 , quite possibly 50 or more.

Many sell raw materials or base products Ukrainian steel, for example where export competitiveness depends less on product quality than on global commodity prices.

Today, however, with Asia s giants, India and China, joining the global economy, prices for oil, gold, wheat, and virtually every other commodity are exploding.

Germany will soon be in the same situation. Meanwhile, new energy extraction technologies, combined with a softer trajectory for global growth, are having a marked impact on commodity prices, cutting deeply into the surpluses of commodity exporters from Argentina to Saudi Arabia.

Commodity prices fell, too.

Latin America s Commodity Windfall

What saved Argentina over the last decade were highly favorable external conditions sky high global commodity prices and technological innovations that greatly increased farm yields.

The scenario could worsen if there is a breakdown in commodity prices one of the most serious threats to Brazil from a global economic slump.

Broad based commodity shortages often begin to emerge at the end of long global expansions, and in this respect, the present boom is no different.

In 2009, sharp drops in commodity prices and the effects of the global financial crisis caused the local currency to drop 40 against the U.S. dollar.

Again, a commodity for consumption.

Since the late nineteenth century, commodity prices have undergone three long term cycles and the upward phase of a fourth, driven primarily by changes in global demand.

Despite the euphoria around shale gas indeed, despite weak global growth commodity prices have risen by as much as 150 in the aftermath of the financial crisis.

International commodity markets are under stress.

United Nations commodity and other conferences.

Those with large current account deficits (India, South Africa, and more than 20 economies in East Europe from the Baltics to Turkey) may suffer from the global credit crunch. Commodity exporters (Russia, Brazil, and others in the Middle East, Asia, Africa, and Latin America) will suffer as the G7 recession and global slowdown drive down energy and other commodity prices by as much as 30 .

How can measures to increase commodity price stability and returns from commodity exports contribute to achieving the Millennium Development Goals?

33. We emphasize the need to address the impact of weak and volatile commodity prices and support the efforts of commodity dependent countries to restructure, diversify and strengthen the competitiveness of their commodity sectors.

But, even with China s change in focus, and despite adverse global economic conditions, growth of around 7 should sustain commodity prices, thereby benefiting exports from Africa and Latin America.

As America sops up the world s savings to address its problems, as risk premiums soar, as global income, trade, and commodity prices fall, developing countries will face hard times.

Growth driven by high commodity prices is also susceptible to busts, for similar reasons. Commodity prices tend to move in cycles.

Fourth, the commodity super cycle that helped Brazil, Russia, South Africa, and many other commodity exporting emerging markets may be over.

But mounting environmental challenges, and the limited availability of commodity substitutes, suggest that a reprieve on commodity prices is not near.

The Silver Lining in High Commodity Prices

Informal briefing on reproductive health commodity security

Informal briefing on reproductive health commodity security