Prices of agricultural products were 25 per cent off their peaks by the end of 2008, much less of a decline than in the case of minerals. Most of the products are foodstuffs, which are less sensitive to fluctuations in global economic output.
Prices of tropical commodities have had a mixed performance (Figure 4). Unlike most other commodity prices, cocoa prices moved sharply upwards through the third quarter of 2008, continued to show strength in December, and registered an increase of about 32 per cent for the year as a whole. The price surge appears to be driven by a shortfall of production in Côte d’Ivoire, the world’s largest cocoa producer and exporter, estimated to be about 35 per cent lower in 2008 than in 2007. The shortfalls are due to high fertiliser prices and relatively high levels of taxation which have reduced incentives to farmers to replant, instead shifting their efforts to other crops. Cocoa prices had been fluctuating around a narrow range during the period 2004-06, substantially lower than in previous years, but they moved up in 2007 in response to strong demand. The price increases are expected to benefit Ghana, Nigeria, and Cameron where production has been increasing.
The prices of coffee, a key export for many African countries, continued to rise in 2008 (by 13 and 22 per cent for Robusta and Arabica varieties, respectively). This followed increases in both 2006 and 2007, especially for Robusta, mainly because of a production shortfall in Viet Nam (which has become a large coffee exporter). Unlike metals, coffee prices continued to rise in the third quarter of 2008 before falling back in the fourth quarter, suggesting that commodity traders may have been pushing prices higher than warranted by the fundamentals. Prices for the month of December 2008 were markedly lower than for the year as a whole, down 15 and 22 per cent for Arabica and Robusta, respectively. In the case of the latter the December price was 5 per cent lower than the average price in 2007 due to a recovery of production in Viet Nam. Little change in their current levels is expected in 2009 and 2010 with growth in production likely only slightly to exceed growth in consumption.