This document discusses international commodity agreements which are intergovernmental arrangements to stabilize prices of primary commodities like coffee, tea, and sugar. It describes three types of agreements: 1) Quota agreements which regulate production and exports to prevent price falls through quotas. 2) Buffer stock agreements which stabilize prices by maintaining supply and demand balance through government stockpiling. 3) Bilateral/multilateral contracts where major exporters and importers agree to buy/sell certain quantities within an upper and lower price range. The objective is to stimulate developing country export earnings and consider interests of both producers and consumers.

1. Presented by,
Karthik . R,
PG Department of Commerce,
3rd sem M.com,
Mysore.

2. Introduction:
Commodity agreements are arrangements between
producing and consuming countries to stabilise
markets and raise average prices. Such
agreements are common in many
markets, including the market for coffee, tea, and
sugar.
Meaning:
International Commodity Agreements which are
inter- governmental arrangements concerning the
production of & trade in, certain primary products
with a view to stabilizing their prices.

3. The basic objective is to stimulating a dynamic & steady
growth & ensuring reasonable predictability in the real
export earnings of the developing countries so as to
provide:
 Expanding the resources for economic & social
development.
 Consider the interest of the consumers in importing
countries
 Considering the remunerative & equitable & stable prices
for primary commodities.
 Considering the import purchasing power
 Increased imports & consumption & also coordination of
production & marketing policies

4. 1. Quota agreements: In international trade, a government-
imposed limit on the quantity of goods and services that
may be exported or imported over a specified period of
time. Limits on the amount of a goods
produced, imported, exported or offered for sale.
 International quota agreements seek to prevent a fall in
commodity prices by regulating prices.
 This agreement undertake to restrict the export or
production by a certain percentage of the basic quota
decided by the Central Committee or Council.
 This type of agreement mostly in the case of the
commodities like coffee, tea & sugar
 This agreement avoids accumulation of stocks require no
financing & do not call for continuous operating
decisions.

5. 2. Buffer Stock Agreements:
 A practice in which a large investor, especially a
government, buys large quantities of commodities
during periods of high supply and stores them so they
do not trade or circulate. The investor then sells them
when supply is low. This is done to stabilize the price.
 It is to stabilizing the prices by maintaining the demand
& supply balance.
 It is more useful for the commodities like tea, sugar
rubber, copper.
 This arrangements only for those products which can
be stored at relatively low cost without the danger of
deterioration & this is one of the limitation of this
agreement.

6. 3.Bilateral or Multilateral Contracts:
 Bilateral agreements may be formed as business or
personal agreements between individuals or companies.
They may also be formed between sovereign countries
in the form of trade agreements or agreements in other
areas. In either case, a bilateral agreement is a binding
contract between the two parties that have agreed to
mutually acceptable terms.
 International sale & purchase contracts may also be
entered into by two or more major exporters &
importers.
 Bilateral contract to purchase & sell certain quantities
of a commodity at agreed prices.
 In this agreement, an upper price & a lower price are
specified.

7.  If the market price, throughout the period of the
agreement, remains within these specified limits the
agreement becomes inoperative.
 If the market price rises above the upper limit
specified, the exporter country is obliged to sell to the
importing country a certain specified quantity of the
upper price fixed by the agreement.
 On the other hand, if the market price falls below the
lower limit specified, the importer is obliged to
purchase the contracted quantity at the specified lower
price.