Unprecedented but not Unpredictable: Effects of the COVID-19 Crisis on Commodity-Dependent Countries

Abstract

The global spread of COVID-19 represents a massive challenge for developing countries. Beyond the health crisis and the sudden stop of domestic economic activities, many countries face turmoil linked to commodity dependence. Commodity prices have reacted strongly to the crisis, reflecting changes in supply and demand due to policy measures to limit contagion. Commodity-dependent developing countries are therefore confronted with an unprecedented combination of shocks. However, the crisis has also exposed structural vulnerabilities of these countries linked above all to commodity price dynamics. In the context of a longstanding debate on commodities and development, we portray recent commodity price developments and underlying drivers and discuss implications for commodity-dependent countries, including the risks of depressed export earnings and of changing global production patterns in the long run. Responses to the crisis have to include measures to stabilize commodity prices as well as strategies for economic diversification.

Can COVID-19 Melt the Craft Chocolate Industry?

“…The cycle of poverty, perpetuated by economic crises that disproportionately impact communities with fewer resources and alternative income strategies, must be broken through innovative approaches to facilitating resilient business practices, particularly along the chocolate supply chain. The sudden halt of economic activities due to the COVID-19 pandemic has led to a sharp drop in income and demand for aggregate commodities including cacao (Tröster and Küblböck 2020 ). This has also been witnessed in a historical context in Brazil, a major cacao producing country in Latin America, with the proliferation of poverty in the aftermath of the spread of witches’ broom’, as highlighted by Trevizan and Marques ( 2002 ), as a result of a dependence on foreign markets, concentration of market share to few commodities buyers, unstable market prices, oversupply and undermined price control, and poor oversight and infrastructure to address the issue; quite similar to commodity cacao markets today.…”

“…With the average imported volume of specialty cacao already much smaller than commodity cacao systems, shipments may need to wait longer with transportation restrictions and supply chain interruptions. Shipments awaiting travel to their final destination under poor storage conditions through port closures may prove to be yet another uncontrolled factor in specialty cacao quality, and it is not clear who will take on the responsibility for those potential losses (Tröster and Küblböck 2020 ).…”

The Connections between COVID-19 and the Energy Commodities Prices: Evidence through the Dynamic Time Warping Method

“…In particular, the ups and downs of oil prices in March and April 2020 exceeded the fluctuations experienced during the global financial crisis of 2008-2009. In addition, the volatility of metal and agricultural commodity prices clearly exceeded the levels of recent years [10]. Unconventional policy decisions by national governments can be more dangerous than the pandemic itself.…”

COVID-19 and the Performance of Exporting Companies in Benin

“…As noted in several studies (AfDB 2020; Ayittey et al 2020;Evans 2020;Laborde et al 2020;Nonvide 2020a, b;Valensisi 2020;World Bank 2020), the consequences of this COVID-19 pandemic would be dramatic worldwide, both from a health and economic point of view. The most affected economies are those with poor healthcare systems, those that rely heavily on tourism, international trade, and commodity exports, and those with high debt burdens and high dependence on volatile international financial flows (AfDB 2020;Tröster and Küblböck 2020). Africa Economic Outlook (AEO) 2020 report indicated that outward-looking West African Countries expected to record negative trade balances through decreases in exports due to coronavirus hitting export markets (AfDB 2020).…”