THE RELATIONSHIP BETWEEN WORLD PRICE INSTABILITY AND THE PRICES FARMERS RECEIVE IN DEVELOPING COUNTRIES

Authors:
  • PHP. B. R. Hazell
    P. B. R. Hazell
  • MJM. Jaramillo
    M. Jaramillo
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Abstract
World prices for agricultural commodities are traditionally unstable, but they were particularly turbulent during the late 1970s and early 1980s. This paper uses available post‐War data on individual commodity prices to test whether world price instability is increasing, and to examine its impact on the prices producers receive in developing countries. It is found that the recent turbulence was more a statistical fluke than the beginning of any longer‐term increase in market instability. Further, while the variability in world prices has been almost entirely transmitted to developing countries in the dollar value of their export unit values, it has not been fully transmitted to average producer prices. Real exchange rates, domestic marketing arrangements and government intervention have acted to buffer price movements for producers in many developing countries.

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