Commodity Special Feature

There is an extensive literature studying the propagation and amplification of sectoral shocks on the macroeconomy through production networks.

https://doi.org/10.5089/9798400281150.081

Primary commodity prices declined by 7.5 percent between February and August 2023. The widespread decline was led by base metals, with prices falling 15.7 percent, and European natural gas prices, plummeting 36.0 percent. The trend decline in cereal prices was temporarily halted by the collapse of the Black Sea Grain Initiative in July. Gold prices increased. This Special Feature analyzes the commodity price channel of monetary policy.

Primary commodity prices declined 28.2 percent between August 2022 and February 2023. The decrease was led by energy commodities, down 46.4 percent. European natural gas prices declined by 76.1 percent amid lower consumption and high storage levels. Base and precious metal prices rebounded by 19.7 and 3.3 percent, respectively, whereas food prices increased slightly, by 1.9 percent. This Special Feature analyzes the impact of declines in the extraction of fossil fuel and other minerals on the macroeconomic activity of commodity exporters.

Primary commodity prices rose 24 percent between August 2021 and February 2022. Energy commodities, especially natural gas, drove the increase, due first to rising geopolitical tensions and later to Russia’s invasion of Ukraine, while the Omicron COVID-19 variant created short-term volatility in late 2021. Base metal prices increased by 2 percent and precious metal prices rose by 3 percent, while agricultural commodities increased by 11 percent. This special feature also analyzes the pace of fossil fuel divestment. Anticipation of lower fossil fuel demand has likely reduced capital expenditures in oil and gas globally over the past three to four years—especially for publicly traded companies— reducing their investment by about 20 percent.

World Economic Outlook, October 2022: Dynamic Causal Effects of Energy, Harvest, and Monetary Policy Shocks on Food Commodity Prices

Commodity prices rose 19.1 percent between February and August 2022. Energy—especially natural gas, up 129.2 percent—led the increase, as Russia cut gas supplies to Europe. Base metal prices declined by 19.3 percent, and precious metal prices fell by 6.0 percent, while those of agricultural commodities fell by 5.4 percent. This special feature analyzes developments in food prices in detail.

20 1. Commodity Price Indices (Index; 2016 = 100) 2011 12 13 14 2. Brent Futures Curves1 Jan. 2020 200 160 120 80 40 0 72 70

160 120 80 40 ... 400 350 300 250 200 150 ... 50 0 1. Commodity Price Indices (Index; 2016 = 100) 2011 12 13 ... 20 ... 2013 14 15

Despite heightened volatility, the IMF’s primary commodity price index remained broadly stable between February and August 2020, the respective reference periods for the April 2020 and October 2020 WEOs (Figure 1.SF.1, panel 1). This reflects two distinct phases: between February and April the index fell by 24 percent as the COVID-19 pandemic intensified; between April and August the index recovered by about 31 percent, as many countries eased lockdown measures and economic activity resumed. The rebound,conditions in end-use sectors and regions affected by the outbreak and on the storability and supply elasticity of a commodity. Prices of energy and some agricultural raw materials rebounded later than metals’ prices. Food prices were less affected, even though changes were widely dispersed across agricultural commodities. This special feature also includes an in-depth analysis of coal.