Dependence on single agricultural commodity exports in developing countries: magnitude and trends[105]

1. Introduction

A prominent feature of agricultural commodity exports in many developing countries is that relatively few commodities account for a large share of total export earnings. Often they depend, and continue to depend, on a single agricultural commodity for their merchandise export revenues.

The sluggish demand for primary agricultural commodities and the recurring conditions of boom and slump in their exports have created problems for commodity-dependent economies. Unstable commodity prices and export earnings are well known to make development planning more difficult and to generate adverse short-term effects on income, investment and employment. In addition, with slow demand conditions, countries specialising in production of primary commodities can be expected to have a declining share in world trade unless they have a major cost or quality advantage over competitors.

This note examines levels of dependence on single commodity exports in developing countries and describes salient market features of the commodities involved.

2. Dependence on single commodity exports

Table 1 ranks 43 developing countries and territories according to the share of the leading agricultural commodity in total merchandise export earnings as well as total agricultural export earnings. The countries comprise those for which more than 20 percent of total merchandise export revenue and more than 50 percent of total agricultural export revenue come from one agricultural commodity. These observations are worthy of note.

• Countries with high dependence on a single export commodity are concentrated in certain regions: 21 in Sub-Saharan Africa, 14 in Latin America and the Caribbean and six in the South Pacific Islands. Thirty-two of these countries are LDCs and/or small island developing States (SIDS);
• Dependence on a single commodity is more pronounced in tropical countries, notably with respect to sugar, coffee, bananas, cotton lint and cocoa beans. Among the 43 countries in the table, sugar was the leading export commodity for seven countries, coffee for six, bananas for six, cotton lint for five and cocoa beans for four.

Table 2 shows for the same countries, changes in the degree of dependence on a single commodity from 1986-88 to 1997-99:

• In 14 out of the 43 countries, the share of the leading agricultural commodity in total export earnings increased in the latter period. The increase was pronounced in Niue, Tonga, Benin, Cyprus, Mauritius, Ecuador and Paraguay. Conversely, in seven countries - Dominica, Uganda, Cuba, Rwanda, Comoros, Ghana, Panama, Fiji and Guatemala - there was a relative decline in their single commodity-dependence.

3. Salient features of agricultural primary commodity markets, 1980-2000

Two features have dominated world agricultural primary commodity markets over the last two decades: relatively high price volatility and a generally declining trend of real prices.

Sharp fluctuations in prices: Historically, world markets of most of the agricultural commodities have been faced with recurring supply/demand imbalances that were reflected in volatile prices. The relative rigidity of short-term supply and the low price elasticity of demand in importing countries, combined with the long gestation period for many of these crops, caused alternating short periods of boom conditions and long periods of oversupply.

Figure 1 - A. Real agricultural commodity price trends (1980 = 100) (deflated by the price index of manufactured exports of industrial economies)

Figure 1 - B. Real agricultural commodity price trends (1980 = 100) (deflated by the price index of manufactured exports of industrial economies)

Table 3 ranks the major agricultural commodities in terms of the instability of annual nominal world prices for the period 1986-99. Overall, instability tends to be higher for agricultural raw materials and beverages than for temperate-zone products. As shown earlier, these are the same commodities on which single commodity exporters (SCEs) depend the most for export earnings.

Long-term decline in prices: Most of the agricultural commodities have experienced sluggish world demand and a downward trend in real prices (Figure 1), essentially because of low income elasticity of demand and the declining intensity of their use as inputs into manufacturing.

In 1999 the price index of agricultural commodities deflated by the price index of manufactured exports of industrial economies was one half of the average for 1980. For tropical beverages, sugar and cotton, the decline was steeper.

Long-term forecasts are not encouraging. According to World Bank estimates for 2015, although real prices of most agricultural commodities are projected to rise above current 2001 levels, they would still remain below their 1990s peaks.

4. Implications for single commodity exporters

In view of the high dependence on a single commodity, the overall export performance of SCEs is inevitably tied to trends and fluctuations in the revenues from that commodity. In addition, most of these countries have highly open economies, with exports of the top single commodity corresponding to a high percentage of their GDP (Table 1). Thus, unstable and generally declining commodity prices greatly compound the problems of commodity-dependent economies, especially in the rural sectors.

First, volatile world commodity prices are believed to have been a major factor causing instability in total export earnings in commodity-dependent economies. Variability in total export earnings could also result from changes in export volumes, which can be caused by several factors including changes in world commodity prices. Large fluctuations in export proceeds are believed to have adverse short-term effects on income, investment, employment, and the price level with consequent detrimental effects on growth. For example, Benin, Chad and Mali gained as much as 30 percent in their total export proceeds following the increase in world prices of cotton from 1994 to 1996 and lost as much as 20 percent with the drop in cotton prices for 1997 to 1999.

Second, sluggish world demand for commodities is likely to lead to a general decline in the share in world trade for commodity exporters. As Table 4 shows, the share in world agricultural commodity exports of the 43 countries as a group has declined sharply, from 7 percent in 1980-89 to 3.9 percent in 1990-99, reflecting slower growth in their commodity export earnings than growth in exports of the rest of the world. There are a number of reasons, other than world demand factors, which might explain this decline, some of which may be related to domestic policies and internal developments in the commodity-dependent economies. Explanatory factors are likely to be the effect of changes in technology in the rest of the world.

In sum, overall growth and stability of export earnings in the SCEs will continue to be determined by what happens in their leading primary agricultural commodities for many years to come.

Table 1. Developing countries and territories: shares of the leading agricultural commodities in total exports, 1997-99

Country/	Export earnings of top single agricultural export commodity				Export earnings of top three agricultural export commodities
	Percentage share in		Earnings	Commodity	Percentage share in		Commodities
territory	Total merchandise exports	Total agricultural exports	as a percentage of GDP (1998)		Total merchandise exports	Total agricultural exports
Burundi	75	83	7.2	Coffee, green	89	99	Coffee, green; tea; sugar refined
Niue	71	95	an	Taro (cocoa yam)	75	100	Taro (cocoa yam); honey; bananas
Sao Tome and Principe	69	97	16.9	Cocoa beans	70	100	Cocoa beans; coffee, green; copra
Ethiopia	62	69	5.4	Coffee, green	75	84	Coffee; dry-salted sheepskin; crude org. mat.
Malawi	59	74	23.8	Tobacco leaves	70	87	Tobacco leaves; tea, sugar (centrif., raw)
St Lucia	54	84	5.5	Bananas	62	96	Bananas; beer of barley; fruit, fresh
Uganda	54	69	4.0	Coffee, green	63	81	Coffee, green; tea; crude org. mat.
Guinea-Bissau	48	91	6.3	Cashew nuts	51	98	Cashew nuts; cotton; palm
Tonga	44	66	2.0	Pumpkins	61	90	Pumpkins; crude org. mat.; vanilla
Rwanda	43	60	1.3	Coffee, green	68	96	Coffee, green; tea; skins, wet-salted goats
Vanuatu	43	54	6.1	Copra	66	83	Copra; veg. prod. fresh or dried; beef
Kiribati	42	100	5.9	Copra	42	100	Copra
Burkina Faso	39	77	4.9	Cotton lint	45	88	Cotton lint; cattle; sheep
Cyprus	39	74	na	Cigarettes	42	80	Cigarettes; potatoes; grapefruit and pomelos
Paraguay	39	54	1.1	Soybeans	53	72	Soybeans; cake of soya; cotton lint
Gaza Strip	39	48	4.5	Ghee (from cow milk)	58	71	Ghee (from cow milk); oranges, potatoes
Grenada	38	70	3.0	Nutmeg	49	90	Nutmeg; cocoa beans; wheat flour
Chad	37	71	5.7	Cotton lint	48	92	Cotton lint; cattle; goats
St Vincent	37	47	5.8	Bananas	68	86	Bananas; flour of wheat; rice
Côte d’Ivoire	36	58	14.4	Cocoa beans	46	74	Cocoa beans; coffee, green; cocoa paste
St Kitts Nevis	35	90	NA	Sugar (centrif., raw)	38	99	Sugar; beverages (non-alcoholic); fat prep.
Cuba	35	72	4.6	Sugar (centrif., raw)	43	88	Sugar (centrif., raw); cigars; tobacco
Comoros	34	69	1.5	Vanilla	49	100	Vanilla; cloves (whole and stems); copra
Benin	33	83	5.9	Cotton lint	38	96	Cotton lint; cotton seed; oil palm
Norfolk Island	32	100	na	Crude org. mat.	32	100	Crude org. mat.
Mali	30	63	7.2	Cotton lint	44	93	Cotton lint; cattle; sheep
Dominica	27	62	6.3	Bananas	31	73	Bananas; plantains; oil (of coconuts)
Kenya	26	42	6.5	Tea	44	71	Tea; coffee, green; crude org. mat.
Belize	26	40	4.5	Sugar (centrif., raw)	51	81	Sugar (centrif., raw); bananas; orange juice
Ghana	24	76	5.5	Cocoa Beans	28	88	Cocoa beans; cocoa butter; pineapples
Ecuador	24	65	5.9	Bananas	29	78	Bananas; crude org. mat.; coffee
Guyana	24	59	3.3	Sugar (centrif., raw)	40	99	Sugar (centrif., raw); rice; beverages
Guatemala	24	39	18.2	Coffee, green	40	66	Coffee; sugar (centrif., raw); bananas
Fiji Islands	23	79	7.5	Sugar (centrif., raw)	25	86	Sugar; molasses; taro (cocoa yam)
Panama	23	53	1.8	Bananas	29	68	Bananas; sugar (centrif., raw); coffee
Togo	23	51	na	Cotton lint	36	80	Cotton lint; coffee, green; cotton
Somalia	23	49	3.7	Cotton lint	36	80	Cotton lint; coffee, greem; cotton
Honduras	22	55	6.5	Coffee, green	30	75	Coffee, green; bananas; cigars cheroots
Zimbabwe	22	49	7.3	Tobacco leaves	29	66	Tobacco leaves; cotton lint, sugar (centrif., raw)
Costa Rica	21	32	6.6	Bananas	40	62	Bananas; coffee, green; crude org. mat.
Mauritius	20	90	1.2	Sugar (centrif., raw)	21	93	Sugar; live animals; beef, prep.
Swaziland	20	43	9.3	Sugar (centrif., raw)	32	71	Sugar (centrif., raw); food prep.; sugar conf.
Gambia	20	43	12.9	Groundnuts shelled	34	72	Groundnuts; groundnut oil; cake (groundnuts)
Nicaragua	19	36	5.1	Coffee, green	29	55	Coffee, green; beef and veal; sugar (centrif., raw)
Djibouti	18	71	na	Cattle	24	99	Cattle; sugar; crude org. mat.
Colombia	16	50	1.7	Coffee, green	26	79	Coffee, green; crude org. mat.; bananas
Tanzania, United Rep. of	16	24	1.2	Cashew nuts	42	62	Cashew nuts; coffee, green; cotton lint
Sri Lanka	15	67	3.1	Tea	17	78	Tea; coconuts; rubber natural dry
El Salvador	15	62	4.5	Coffee, green	18	77	Coffee, green; sugar raw; food prep.
Afghanistan	14	23	na	Skins (goats)	38	64	Skins (goats); grapes; raisins
Myanmar	13	63	0.7	Beans, dry	17	82	Beans dry; sesame seed; natural rubber
Dominican Republic	13	28	na	Sugar (centrif., raw)	24	51	Sugar (centrif., raw); coffee; cocoa beans
Sudan	13	17	0.7	Sesame seed	38	47	Sesame seed; sheep; crude org. mat.
Barbados	12	36	1.3	Sugar (centrif., raw)	22	70	Sugar (centrif., raw); beverages; food prep.
Madagascar	12	34	0.8	Coffee, green	21	60	Coffee, green; cloves (whole and stems); vanilla
Samoa	12	30	1.3	Copra	33	79	Copra; fruit prepared; oil (of coconuts)
Central African Rep.	11	51	1.4	Cotton lint	21	96	Cotton lint; coffee, green; cattle
Dem. Rep. of the Congo	10	71	1.4	Coffee, green	13	91	Coffee, green; crude org. mat.; cocoa beans
Suriname	10	49	0.6	Milled paddy rice	19	93	Milled paddy rice; bananas; rice, husked
Solomon Islands	10	43	4.8	Oil of palm	18	77	Oil of palm cocoa beans; copra
Papua New Guinea	10	41	4.7	Coffee, green	19	78	Coffee; oil of palm; cocoa beans
Bolivia	10	30	na	Cake of soybeans	19	59	Cake of soybeans; oil of soybeans; soybeans
Uruguay	10	20	1.3	Beef	20	41	Beef; rice; beef
Viet Nam	10	43	3.4	Milled paddy Rice	17	77	Milled paddy rice; coffee, green; rubber
Niger	9	29	1.1	Cigarettes	20	67	Cigarettes; cattle; onions dry
Liberia	9	93	na	Rubber natural dry	10	100	Rubber dry; cocoa beans; oil of palm
Cambodia	9	76	1.3	Rubber natural dry	10	85	Rubber; crude org. mat.; must of grapes
Haiti	8	50	0.4	Coffee, green	14	83	Coffee, green; mangoes; cocoa beans
Pakistan	7	52	0.6	Milled paddy rice	9	72	Rice; sugar refined; crude org. mat.
Jamaica	7	33	1.4	Sugar (centrif., raw)	13	56	Sugar raw; bananas; beverages dist. alcoholic
Mongolia	7	23	na	Hair	15	50	Hair; skin with wool, sheep; skin, sheep
Argentina	7	16	0.9	Cake of soybeans	17	36	Cake of soybeans; oil of soybeans; wheat
Wallis Futuna Is.	7	100	1.2	Crude org. mat.	7	100	Crude org. mat.
Syrian Arab Rep.	7	25	0.0	Cotton lint	12	46	Cotton lint; wheat; tomatoes
Micronesia	6	60	0.9	Oil of coconuts	11	100	Oil of coconuts; copra
Mozambique	6	32	0.4	Cotton lint	14	80	Cotton lint; cashew nuts (shelled); sugar
Malaysia	5	54	0.3	Oil of palm	6	69	Oil of palms; rubber; oil of palms kernels
Peru	5	44	1.5	Coffee, green	7	62	Coffee, green; vegetables prep; asparagus
Namibia	5	43	1.2	Beef	11	94	Beef; cattle; sheep
Cameroon	5	28	5.1	Cocoa beans	12	63	Cocoa beans; coffee, green; cotton lint
Jordan	5	22	2.0	Oils hydro-genated	10	50	Oils hydrogenated; sheep; tomatoes
Brazil	5	16	0.4	Coffee, green	13	43	Coffee; soybeans; cake of soybeans
Nepal	5	27	0.5	Flour of wheat	12	65	Flour of wheat; sugarcane; lentils
Tunisia	4	50	na	Oil of olive	6	68	Oil of olive; dates; cigarettes
Am. Samoa	4	100	1.1	Pet food	4	100	Pet food
Lao PDR	4	53	na	Coffee, green	6	83	Coffee, green; buffaloes; cattle
Cook Islands	4	50	0.2	Papayas	6	85	Papayas; crude org. mat.; mangoes
Mauritania	4	49	1.2	Cattle	7	89	Cattle; sheep; goats
Eritrea	4	42	1.8	Sesame seed	8	93	Sesame seed; sheep; skin, dry salted sheep
Bhutan	4	29	1.1	Oranges	7	51	Oranges; flour of wheat; fruit, fresh
Botswana	3	63	na	Beef	4	75	Beef; food prep; sugar conf.
Guinea	3	45	1.3	Coffee, green	5	82	Coffee, green; cattle; cotton lint
Senegal	3	39	0.6	Oil of groundnuts	6	65	Oil of groundnuts; cotton lint; cashew nuts
Egypt	3	32	1.9	Cotton lint	6	58	Cotton lint; milled rice; potatoes
Thailand	3	24	0.2	Milled paddy rice	6	46	Milled paddy rice; rubber; sugar
Congo	3	24	0.7	Sugar (centrif., raw)	4	25	Sugar raw; cocoa beans; cigarettes
India	3	20	0.2	Milled paddy rice	6	41	Rice; cake (soybeans); crude org. mat.
Chile	3	18	na	Wine	7	43	Wines; grapes; apples
Bahamas	3	79	0.1	Beverages	3	88	Beverages; fruit prep; grapefruit & pomelos
Korea, Dem. People’s Rep. of	3	36	0.6	Straw, husks	7	81	Straw, husks; mushrooms; tobacco leaves
Lebanon	3	15	1.5	Apples	7	37	Apples; crude org. mat.; oranges
Bangladesh	2	58	0.2	Jute	3	91	Jute; tea; vegetables fresh
Lesotho	2	47	1.9	Wool, greasy	3	71	Wool; food wastes; vegetables prep.
Oman	2	40	1.0	Chocolate products	3	58	Chocolate products; flour of rye; goat meat
Nigeria	2	39	0.2	Cocoa beans	3	68	Cocoa beans; rubber, natural; oil of palm
Philippines	2	35	0.5	Oil of coconuts	3	55	Oil of coconuts; bananas; crude org. mat.
Zambia	2	30	0.4	Sugar (centrif., raw)	5	60	Sugar raw; cotton lint; tobacco leaves
Indonesia	2	21	na	Rubber natural dry	5	51	Rubber dry; oil of palm; coffee, green
Trinidad and Tobago	2	18	0.5	Beverages	4	44	Beverages; sugar; beverages, dist. alcoholic
Morocco	2	16	0.7	Oranges	6	44	Oranges; tangerines; tomatoes
Turkey	2	12	0.9	Hazelnuts, shelled	5	27	Hazelnuts, shelled; tobacco leaves; raisins
Equatorial Guinea	2	99	0.7	Cocoa beans	2	100	Cocoa beans; cocoa husk; coffee, green
Neth. Antilles	2	65	0.3	Milled paddy rice	2	86	Milled paddy rice; sugar; food prep.
Iran, Islamic Rep. of	2	30	0.5	Pistachios	3	46	Pistachios; oil of soybeans; skin, sheep
Antigua and Barbuda	1	93	0.1	Beverages	1	100	Beverages; dist. alcoholic, food prep.
Brunei Darussalam	1	89	na	Duck meat	1	93	Duck meat; beverages; food prep.
Singapore	1	30	na	Cigarettes	1	45	Cigarettes; beverages, dist. alcoholic; pepper
Venezuela	1	22	0.0	Cigarettes	1	34	Cigarettes; sesame seed; coffee, green
Mexico	1	11	0.2	Coffee, green	3	29	Coffee; beer of barley; tomatoes
China[106]	1	10	na	Crude org. mat.	1	21	Crude org. mat.; maize; milled paddy rice
Aruba	1	81	na	Cigars cheroots	1	97	Cigars cheroots; whole milk; food prep.
French Polynesia	1	45	0.5	Oil of coconuts	2	90	Oil of coconuts; crude org. mat.; vanilla
China, Macao	1	38	0.2	Cigarettes	1	70	Cigarettes; wool; beverages, dist. alcoholic
Cape Verde	1	35	na	Apples	1	59	Apples; crude org. mat.; pastry
Gabon	1	54	na	Rubber, natural dry	0	93	Rubber, natural dry; oil of palm; cocoa beans
United Arab Emirates	1	24	0.2	Cigarettes	1	38	Cigarettes; dates; nuts
Bahrain	<1	20	0.6	Oil of maize	1	56	Oil of maize; oil of palm; flour of wheat
Korea, Republic of	<1	17	0.4	Pork	1	44	Pork; crude org. mat.; food prep.
Kuwait	<1	10	na	Fruit juice	<1	26	Fruit juice; beverages, non-alcoholic; flour of wheat
British Virgin Islands	<1	100	na	Fruit, fresh	<1	100	Fruit, fresh
Guam	<1	100	na	Crude org. mat.	<1	100	Crude org. mat.
St Pierre & Miquelon	<1	100	na	Food prep.	<1	100	Food prep.
Iraq	<1	88	na	Dates	<1	96	Dates; sugar conf.; skin, dry salted sheep
Montserrat	<1	79	na	Vegetables fresh	<1	100	Vegetables fresh; fruit prep.; beef and veal
Angola	<1	77	0.3	Coffee, green	<1	100	Coffee, green; hides wet salted cattle
Algeria	<1	42	0.2	Dates	<1	72	Dates; pastry; wine
Greenland	<1	42	na	Fur skins	1	81	Fur skin; crude org. mat.; mutton & lamb
Qatar	<1	39	na	Sheep	<1	72	Sheep; mutton and lamb; tea
Libyan Arab Jam.	<1	37	na	Skin (sheep)	<1	62	Skin with wool, sheep; onions; groundnuts
Seychelles	<1	27	0.2	Cinnamon (canella)	1	68	Cinnamon; beverages, dist. alcoholic.; crude org. mat.
China, Taiwan Prov.	<1	27	na	Crude org. mat.	<1	43	Crude org. mat.; food prep.; pork
New Caledonia	<1	20	na	Crude org. mat.	<1	46	Crude org. mat.; vegetables; beverages, non-alcoholic
Yemen	<1	19	0.2	Coffee, green	1	39	Coffee, green; coffee, roasted; oils
China, Hong Kong SAR	<1	17	na	Cigarettes	1	34	Cigarettes; chicken meat; crude org. mat.
Saudi Arabia	<1	8	0.2	Skim milk, of cows	<1	22	Skim milk, of cows; butter; chicken meat
Falkland Is	NA	100	na	Wool, greasy	na	100	Wool, greasy
Marshall Is	NA	99	na	Oil of coconuts	na	100	Oil of coconuts; cake of coconuts; crude org. mat.

Notes:

<1: a percentage less than 1.
na: not available
Source: Computed from FAOSTAT, January 2002; and World Bank, World Development Indicators, 2000.

Country/ territory	1997-99		1986-88		Increase in
	Percentage share of the commodity in:		Percentage share of the commodity in:		share in 1997-99
	Total merchandise exports (1)	Total agricultural exports (2)	Total merchandise exports (3)	Total agricultural exports (4)	(percentage points) (1 - 3)
Burundi	75	83	84	90	-9
Niue	71	95	32	36	40
Sao Tome & Principe	69	97	59	94	10
Ethiopia	62	69	66	69	-5
Malawi	59	74	58	64	1
St Lucia	54	84	62	87	-7
Uganda	54	69	92	95	-38
Guinea-Bissau	48	91	54	72	-7
Tonga	44	66	16	28	28
Vanuatu	43	54	37	61	6
Rwanda	43	60	76	83	-34
Kiribati	42	100	50	99	-8
Paraguay	39	54	29	40	10
Burkina Faso	39	77	43	70	-4
Cyprus	39	74	7	20	32
Grenada	38	70	44	56	-6
St Vincent	37	47	36	46	2
Chad	37	71	43	55	-6
Côte d’Ivoire	36	58	31	46	4
Cuba	35	72	73	88	-38
St Kitts and Nevis	35	90	40	80	-6
Comoros	34	69	66	80	-32
Benin	33	83	16	57	17
Norfolk Is	32	100	32	100	0
Mali	30	63	38	46	-9
Dominica	27	62	65	90	-38
Kenya	26	42	31	43	-5
Belize	26	40	31	49	-6
Ghana	24	76	47	89	-23
Ecuador	24	65	13	39	11
Guyana	24	59	34	77	-10
Guatemala	24	39	42	55	-18
Togo	23	51	15	36	8
Somalia	23	49	25	27	-1
Panama	23	53	43	70	-20
Fiji	23	79	42	83	-19
Honduras	22	55	37	48	-15
Zimbabwe	22	49	18	46	4
Costa Rica	21	32	30	45	-10
Mauritius	20	90	4	50	17
Gambia	20	43	24	54	-4
Swaziland	20	43	31	54	-12

Source: Computed from FAOSTAT, January 2002.

Commodity	Index[107]
Coffee	25.5
Sugar	22.4
Poultry	21.4
Rubber	18.7
Palm oil	18.7
Jute	18.1
Cocoa	17.7
Groundnut oil	16.2
Butter	16.1
Cotton	15.9
Pigmeat	15.7
Lamb	15.5
Milk	15.1
Cheese	14.3
Soybean oil	13.3
Wheat	13.0
Hides and skins, goats	12.8
Coarse grains	11.9
Beef	11.2
Rice	10.9
Cottonseed oil	10.3
Tea	09.6
Sisal	08.7
Bananas	08.6

Source: Computations based on data maintained at FAO, January 2002.

		43 commodity- dependent countries	Other developing countries
Average annual percentage growth in total merchandise exports
	1980-89	1.1	1.4
	1990-99	5.1	8.8
Average annual percentage growth in total agricultural exports
	1980-89	0.9	2.8
	1990-99	3.4	5.9
Share of world agricultural exports (percent)[108]
	1980-89	7.0	25.2
	1990-99	3.9	25.0

Source: Computed from FAOSTAT, January 2002.