ABSTRACT
This chapter discusses the importance of the choice of currency for the indicator price and – a special case for cocoa – the effects of full price transmission to producers in major exporting countries. Common to both agreements is the establishment of a buffer stock. Purchases and sales by the buffer stock manager should keep the world market prices within designated upper and lower limits for the indicator price. The report goes on to state that, in the 1981-2 cocoa year, the imbalance between cocoa supply and demand worsened because of world economic recession, appreciation of the US dollar and high interest rates, resulting in a production surplus of the order of 135,000 tonnes and prices remaining consistently below the initial lower intervention price of 110 US cents per pound. The way supply could be modelled in the present study only partly reflects the above considerations.
