One very disturbing characteristic of the weakness of real commodity exports since the early eighties is its predominantly persistent or secular rather than^cyclical nature,

especially in the case of beverage products which are of major importance for many African countries 35 It has been indeed argued that 85 per cent of the variations m the prices of these products are due to permanent rather than to temporary shocks. For metal prices, the permanent shocks seem to have played a smaller role, although still important since they account for about 30 per cent of the changes. Overall, permanent factors account for 45 per

cent of yearly variations of commodity prices.

MtMMwy Puod. Aufint, 1994.

The structural factors lying behind the secular trends have been widely discussed. On

the demand side, the slowdown in growth in developed countries is the most often mentioned factor Other explanations put forward are the decline in the relative use of metals in these countries due to the increasing share of services as well as to the fall in investment which

On the supply side, economic reforms and productivity gains resulting from technical

progress have led to a significant expansion in commodity supplies in many Asian and Latin

American countries.

The twelve products listed in (Table IE. 11) dominate the region's commodity export

earnings Crude petroleum has been by far the most important commodity, representing between two thirds and 43 per cent of total earnings. The other commodities, constituting major sources of earnings for many African countries, each make up only a small share of total exports at the region's level. Copper, the next most important commodity has made up 2 4 per cent of the region's total earnings during the years 1990-1992, whereas the shares of cocoa cotton and coffee stood respectively at around 2, 1.8 and 1.7 per cent over the same years Africa's exports will thus continue to be in the future dominated largely by petroleum (and natural gas), even though other commodities wills till be major sources of

foreign exchange earnings for most individual countries.

Table in. 11 Africa's commodity export composition: 1980/82-1990/92

(export vaiu

All commodities I 75 1031 100.001 68 3571 100.00 t: Calculations based on UNCTAD data (UNCTAD Commodity Yearbook),

various isues.

Table m.12: Africa's commodity export: volumes, prices and shares (1980-1992) (Export value in million US$, lshares in percentage)

Commodity

Source: Estimates based on data from UNCTAD data, Commodity yearbook, various

issues.

2. Developments in the markets and in Africa's exports for some selected commodities

Coffee

Africa's exports of coffee have shown no consistent pattern over the period 1980-1992, fluctuating widely around an average of 950,000 MT. The absence of such a pattern also characterized the more recent period of 1985 to 1992. This is in contrast to an expansion in world exports at an annual average rate of about 2.6 per cent during the same period, although the latter have also shown wide fluctuations. These divergent movements have led to a significant decline in Africa's share of world exports, from an average of almost 26 per cent in 1980-82 to less than 20 per cent in 1990-1992 (Table III. 12). While it is true that coffee exports are very sensitive to climate conditions such as the occurrence

or not of frost in Brazil, which is the world largest exporter, other non-African countries have significantly increased their exports. Such is the case of Indonesia which exported more or less the same quantities as Cote d'lvoire back in 1983 but which doubled its export to almost twice that of Cote d'lvoire in 1991-1992. Another country, Vietnam, exported hardly any coffee until 1985, but has recently reached an export volume equal to about 40 per cent of that of Cote d'lvoire. African coffee exporters have thus not taken part in the expansion

of world coffee trade.

Econometric estimates over the period 1980-1992 show relatively low sensitivity of exports to variations in the real price of coffee, and a somewhat higher sensitivity to income.

The most significant determinant variable turns out to be the real income of the developed countries, i.e. the OECD countries, measured by their total GDP expressed in constant prices. The income elasticity of world demand has been estimated at about 0.6, meaning that an increase in world GDP by one percentage point would induce an increase in total imports

by 0.6 per cent.

The eighties have witnessed not only wide fluctuations but also a sharp downward trend in export prices. The average price first decreased from US$3200 for a metric tonne to US$2600 the following year. Prices briefly recovered in 1986, then declined again in much greater proportions than at the beginning of the decade, and stood at less than US$900 in 1992. The overall trend has been clearly downward, with the unit value declining at an annual rate of 7 per cent over the 1980-1992 period and 14 per cent over the more recent shorter period, 1985-1992. There has however been an upturn in prices during the last two years which according to most projections will not be lasting.

The decline in the real price of coffee has been even sharper. It terms of purchasing power, measured by the ratio of the coffee unit value to Africa's total import unit value indices, the real price has decreased in 1990-1992 to less than a third of its 1980 level.

In the historical and normative senarios to be analysed below, it is important to know what the prospects lie ahead for the region's coffee and other export products. As far as coffee is concerned, declining world production has induced a strong price recovery in 1994.

With the widespread frosts that have hit Brazil, the 1995-1996 crop has already been extensively damaged so that price recovery has already been reached in 1995. The question is whether Africa's exports will increase after a long period of stagnation? In the short run output expansion may come from higher yields of the same stock of trees as higher export prices are being reflected into higher producer prices. But the larger effect may come from new plantings that will not induce higher production before several years.

With the liberalization of marketing and pricing that has already been implemented in some African coffee producing countries such as Cameroon and Uganda and the liberalization plans which started in other countries such as Cote d'lvoire, it is expected that producer prices will be more strongly linked to world prices and that farmers will be more responsive to the latter. Furthermore, the devaluation of the CFA Franc has already been partly passed on to producers in countries like Cote d'lvoire and Cameroon with the prospects of an expansion in the regions' production and exports.

World exports will continue to be dominated in the future by world demand and supply conditions as well as by policies adopted in the major Latin American producing countries, namely Brazil and Colombia. During the last few years, these two countries, as well as other Central American producing countries, have been implementing retention programmes by which subsidized loans are granted for stocking. If this policy continues to be effective, then international prices are not likely to dive again as they have done between the years 1986 and 1992. The conclusion we can draw from this situation is that with reasonable growth of world demand, which is very much determined by growth prospects in the developed countries, export prices are unlikely to return to the depressed levels of the

eighties.

The effects of the Agricultural Agreement of the Uruguay Round on earnings from coffee exports are likely to be marginal. This agreement stipulates a reduction in tariffs on coffee, just like on other commodities. However, duties on this product are already low in developed countries, so that the impact of trade liberalization on these countries' imports as

well as on the prices that will be received by African exporters is likely to be low.36