Baffes, John

Person:
Baffes, John

Development Prospects Group, Development Economic Research Department, The World Bank

Fields of Specialization

Commodity markets; trade policies; agricultural economics

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Development Prospects Group, Development Economic Research Department, The World Bank

Last updated: January 13, 2025

Biography

John Baffes is a Senior Economist with the Development Prospects Group of the World Bank. Currently, he manages the World Bank’s the Commodity Quarterly report, including the commodity price forecasting and market monitoring process. Other responsibilities include analysis and research on market structure, policy reforms, policy advice to various country departments and senior management, and maintaining the World Bank’s commodity-related data systems. Since joining the World Bank in 1993, he has worked in several operational departments, including Latin America, South Asia, and Sub-Saharan Africa.

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Now showing 1 - 10 of 38

Yield Growth Patterns of Food Commodities: Insights and Challenges
(Washington, DC: World Bank, 2024-12-03) Baffes, John; Etienne, Xiaoli
Understanding global food production and productivity patterns is crucial for policy and in-vestment decisions aimed at addressing poverty, food insecurity, and climate change. This paper develops comprehensive calorific-based production and yield indexes for 144 crops, covering 98 percent of global agricultural land and food output. These indexes provide standardized measures across various crops and varieties, facilitating comparison of agricultural productivity and consolidating country and regional contributions to global food production. Utilizing a Box-Cox transformation, the analysis finds that a linear model best approximates yield growth. The findings reveal that, at an aggregate level, there has been no discernable slowdown in global yield growth over the past six decades. This translates into an average annual yield increase equivalent to nearly 33 kilograms of wheat per hectare. These results suggest that any observed deceleration in specific commodities, regions, or countries has been offset by gains in others. While these findings are reassuring from a global food supply perspective, caution is warranted about the sustainability of production and the affordability of food. These concerns are particularly relevant as global food demand increases due to population and income growth, and as the pressures from climate change intensify. The study underscores the importance of adopting strategic and sustainable agricultural practices to ensure continued food security in the face of evolving global challenges.
Adding Fuel to the Fire: Cheap Oil during the COVID-19 Pandemic
(World Bank, Washington, DC, 2020-07) Wheeler, Collette Mari; Baffes, John; Kabundi, Alain; Kindberg-Hanlon, Gene; Nagle, Peter S.; Ohnsorge, Franziska
The outbreak of COVID-19 and the wide-ranging measures needed to slow its advance triggered an unprecedented collapse in oil demand, a surge in oil inventories, and a record one-month decline in oil prices in March 2020. This paper examines the likely implications of the 2020 oil price plunge for emerging market and developing economies. It presents four main results. First, the record plunge in oil prices was predominantly driven by demand factors as wide-ranging measures to stem the pandemic precipitated an unprecedented collapse in oil demand, but the surge in oil inventories also exerted downward pressure on oil prices. Second, this latest oil price decline was preceded by six previous plunges over the past half-century, during which energy exporters and importers suffered similar initial output losses (about 0.5 percent) that were unwound within three years. Third, the current episode of low oil prices holds limited promise to boost the global economy amid widespread restrictions and narrow room for fiscal support in energy-exporting emerging market and developing economies. Fourth, many emerging market and developing economies entered the current public health crisis with precarious fiscal positions; current low oil prices are thus an opportunity to review energy-pricing policies, including remaining energy subsidies, to mobilize domestic resources.
Commodity Price Shocks: Order within Chaos?
(World Bank, Washington, DC, 2021-10) Kabundi, Alain; Baffes, John
The prices of 27 internationally traded commodities are decomposed into transitory and permanent shocks by applying an ideal band-pass filter to monthly data from 1970–2020. The two types of shocks contributed roughly equally to price variations, but with wide heterogeneity. Permanent shocks ac-counted for two-thirds of the variability in agricultural prices but less than 30 percent in energy prices. The transitory shock component revealed three medium-term cycles. The first (from the early 1970s to the mid-1980s) and third (from the early 2000s to 2020 onward) exhibit similar duration and involve almost all commodities, while the second (spanning the 1990s) is mostly applicable to metals, with the notable absence of energy. The permanent shock components differ across commodities, with an up-ward trend for most industrial commodities and downward trend for agriculture. Moreover, the permanent component of commodity prices where investment is irreversible, including energy, metals, and tree crops, exhibits a high degree of nonlinearities, which also coincide with the two post–World War II supercycles. By contrast, the permanent component of annual agricultural prices is linear, reflecting greater flexibility in investment allocation and input use of these commodities. Prices of commodities subjected to widespread policy interventions, such as international commodity agreements, exhibit persistent deviations from linear trends.
The Role of Income and Substitution in Commodity Demand
(World Bank, Washington, DC, 2020-01) Kabundi, Alain; Baffes, John; Nagle, Peter
This paper presents estimates of time-varying income elasticities of demand for energy and metal commodities. The analysis finds that the elasticities are close to unity, evaluated at world median per capita income levels. Furthermore, the estimates confirm that as income rises, demand growth for industrial commodities slows and eventually plateaus. Indeed, estimates for aggregate metals and energy differ by an order of magnitude throughout the income spectrum: from a low of 0.2 for advanced economies to nearly 2 for low-income countries. The analysis, which accounts for substitutability by estimating group aggregates as well as individual commodities with cross-price effects, is based on a panel autoregressive distributed lag model covering 1965-2018, for up to 63 countries.
What Drives Local Food Prices? Evidence from the Tanzanian Maize Market
(Published by Oxford University Press on behalf of the World Bank, 2019-02) Baffes, John; Mitchell, Donald
We examine the drivers of monthly changes in maize prices across 18 Tanzanian markets. Local prices respond three to four times faster to the main regional market (Nairobi) than to the international benchmark (US Gulf). More importantly, shocks from Nairobi account for only one third of the explained variation in domestic prices; the remaining two-thirds is accounted for by domestic influences (including harvest cycles, weather shocks, and trade policies). Further, we show that remoteness and the local agroecology systematically influence the behavior of food prices.
The Role of Major Emerging Markets in Global Commodity Demand
(World Bank, Washington, DC, 2018-06) Kabundi, Alain; Baffes, John; Nagle, Peter; Ohnsorge, Franziska
Rapid growth among the major emerging markets over the past 20 years has boosted global demand for commodities. The seven largest emerging markets accounted for almost all the increase in global consumption of metals, and two-thirds of the increase in energy consumption over this period. As emerging market economies mature and shift towards less commodity-intensive activities, their demand for commodities may plateau. This paper estimates income elasticities of demand for a range of energy, metal and food commodities, and finds evidence of plateauing among several commodities. Looking ahead, as economies mature and GDP growth slows, growth in demand for commodities may also slow. Based on current population and GDP growth forecasts, this paper produces scenarios of potential growth in demand for commodities over the next decade. While global energy consumption growth may remain broadly steady, growth in global demand for metals and food could slow by one-third over the next decade. This would dampen global commodity prices. Despite an expected slowdown in its growth rate, China would likely remain the single largest consumer of many commodities. For the two-thirds of emerging market and developing economies that depend on raw materials for government and export revenues, these prospects reinforce the need for economic diversification and the strengthening of policy frameworks.
The 2014-16 Oil Price Collapse in Retrospect: Sources and Implications
(World Bank, Washington, DC, 2018-04) Stocker, Marc; Baffes, John; Some, Y. Modeste; Vorisek, Dana; Wheeler, Collette M.
With the benefit of hindsight, this paper provides a fresh and comprehensive look at the causes of the 2014-16 collapse in oil prices and its impact on the global economy. It disentangles the contribution of supply and demand factors, assesses the impact on activity in oil exporters and oil importers, and reviews policy responses in these countries. The main conclusions are: (i) the decline in oil prices was predominantly triggered by supply factors, particularly rapid efficiency gains in U.S. shale oil production, but softening demand prospects played a substantial role as well; (ii) the short-term benefits of falling oil prices for the global economy were muted by economic rebalancing in China, a low responsiveness of activity in other oil-importing emerging markets, and a sharp slowdown in U.S. investment as energy sector activity declined and a the U.S. dollar strengthened; (iii) oil exporters with flexible exchange rates and relatively large fiscal buffers fared better than others, but most oil-exporting economies still face significant policy challenges as their medium-term prospects for growth and fiscal revenues have deteriorated; (iv) fundamental changes in the oil market make a return to the oil price levels of the early 2010s unlikely, pointing to the need for accelerated reforms, particularly among oil exporters.
What Explains Agricultural Price Movements?
(2016-03) Haniotis, Tassos; Baffes, John
After 2005, commodity prices experienced their longest and broadest boom since World War II. Agricultural prices have now come down considerably since their 2011 peak, but are still 40 percent higher in real terms than their 2000 lows. This paper briefly addresses the main arguments on the causes of the agricultural price cycle. It broadens the scope of analysis by focusing on six agricultural commodities, and identifies the relative weights of key quantifiable drivers of their prices. It concludes that increases in real income negatively affect real agricultural prices, as predicted by Engel's Law. Energy prices matter most (not surprisingly, given the energy-intensive nature of agriculture), followed by stock-to-use ratios and, to a lesser extent, exchange rate movements. The cost of capital affects prices only marginally, probably because it not only influences demand, but also evokes a supply response.
Monetary Conditions and Metal Prices
(Taylor & Francis, 2014-01-27) Savescu, Cristina; Baffes, John
The monetary easing of the past few years by the world’s major central banks through conventional and unconventional policies coincided with the longest and broadest commodity price boom since the Second World War. And not surprisingly, the impending normalization of monetary conditions has created expectations of a likely reversal in commodity price trends. Based on a reduced form, price-determination model which accounts for all quantifiable sectoral and macroeconomic fundamentals, this note finds that the effect of short-term interest rates on metal prices is mixed and modest. But, changes in longer term rates have a positive and highly significant impact. The note also concludes that metal prices respond (in that order) to industrial production, input prices, US dollar movements and physical stocks of metals.
Sources of Volatility during Four Oil Price Crashes
(World Bank, Washington, DC, 2015-09) Kshirsagar, Varun; Baffes, John
Previous sharp oil price declines have been accompanied by elevated ex post volatility. In contrast, volatility was much less elevated during the oil price crash in 2014/15. This paper provides evidence that oil prices declined in a relatively measured manner during 2014/15, with dispersion of price changes that was considerably smaller than comparable oil price declines. This finding is robust to nonparametric and GARCH measures of volatility. Further, the U.S. dollar appreciation exerted a strong influence on volatility during the recent crash; in contrast, the impact of shocks on equity markets was muted.