The document discusses international commodity agreements established after the formation of the UN and other financial institutions, focusing on their objectives to stabilize export incomes of primary goods like wheat, sugar, and coffee. It details three main types of agreements: multi-lateral contracts, international buffer stocks, and export restriction agreements, highlighting their roles in price stabilization and addressing production and consumption imbalances. Specifically, the international wheat agreement from 1949 is noted for setting specific price ranges for wheat, emphasizing the importance of cooperation among exporters and importers in these agreements.

1. International commodity Agreement
International Business

2. Prepared By
Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com
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3. Introduction
• After the establishment of UN
and its specialized agencies
certain other financial
institutions like IMF, IBRD and
GATT were also set up. Along
with them, the_ FAO, WHO and
UNICEF were also established.
In addition to these, certain
other agreements also took
place regarding exports of
developing countries. Such
agreements are given the name
of International Commodity
Agreements

4. Introduction
• Such agreements regarding
five main items like wheat,
sugar, coffee, tin and olive oil
took place. These agreements
are given the name of
Agreements between
Consumers and Producers.
Out of these international
Commodity Agreements, the
agreements of exports and
imports of wheat and tin got
much more importance.

5. Objectives
• The main objective behind
world commodity agreement is
to restrict the quantities of
exports, particularly the
primary goods. The purpose
behind is to increase export
incomes or stabilize them.
• These agreements will lead to
economic. Stabilization as the
fluctuations regarding their
prices and quantities will come
down in their producing
countries.

6. Objectives
• The demand and supply of
so many primary exports
and imports are less elastic.
As a result, dis-equilibrium
rises in their consumption
and production. This gives
rise to so many negative
effects. Hence, these
agreements will help to
remove these disequilibria
and distortions.

7. Objectives
• So many countries follow
protectionist policies or
adopt preferential
treatment with other
countries. As a result, the
markets of primary goods
shrink. But if such
agreements are made
such like circumstances
will not rise.

8. Major Agreements
• In connection with international agreements
regarding commodities, we discuss three main
agreements out of them.
– Multi-lateral Contract Agreement
– International Buffer Stocks
– Export Restriction Agreement

9. Multi-lateral Contract Agreement
• Under such agreements
it is made compulsory
between exporters and
importers that they will
sell or purchase specific
quantities of goods.
Again, such quantities
are attached with some
maximum or minimum
price.

10. Multi-lateral Contract Agreement
• Amongst these agreements, the
most important and the sole
agreement is ‘International
Wheat Agreement’. This
agreement took place in 1949
where two-third of the world
trade of wheat was included.
Under this agreement, the
maximum price of wheat was set
at $1.80 per bushel and the
minimum price for the first year
would be $1.50 per bushel, while
for the fourth and the last year
such minimum price would be
$1.20 per bushel.

11. International Buffer Stocks
• International buffer stock
agreements seek to stabilize
commodity prices by
maintaining the demand
supply balance.
• Buffer stock agreements
stabilize the price by
increasing the market
supply by the sale of the
commodity when the price
tends to rise and by
absorbing the excess supply
to prevent fall in the price.

12. International Buffer Stocks
• Buffer stock Plan requires an
international agency to set a
range of prices and to buy
the commodity at the
minimum and sell at the
maximum. Buffer pool
method was tried in case of
tin, cocoa and sugar and
commodities like tea,
rubber and copper have
been suggested as
prospective candidates for
new agreements.

13. Export Restriction Agreement
• Under this agreement, the
member countries will have the
right to restrict the quantities of
their exports. They could do so
as long as the prices of exports
are not stabilized to some
extent. Apparently, this scheme
may be like the scheme of an
individual producer who wants
to restrict his output, and it may
not be a ‘joint programme on
the part of all the producers or
exporters

14. Export Restriction Agreement
• Moreover, if it becomes a
joint programme of all the
exporters, it cannot succeed
till the importers join it.
Moreover, it is not necessary
that the costs of all the
producers are same. Those
producers and exporters
whose costs are lower will be
prepared to sell at some
lower price. While the higher
costs exporters may ask for
some higher price.