ECONOMICS AND FINANCE World commodity prices and their impact on developing countries


Momodou Camara (Acca)

Commodities, raw or partially processed, are often the most significant exports of developing countries, and revenues obtained from them have an important effect on the economies and living standards in these countries. Commodity price fluctuations, along with the globalisation of the world economy and increased liberalisation of commodity markets have led to profound changes that seriously affect the weaker economies of the developing world. Commodity price instability has a negative impact on economic growth, countries’ financial resources, and income distribution, and may lead to increased poverty instead of poverty alleviation. Many countries, especially in Africa, derive more than 90% of their export earnings from commodities.

The commodity protocols annexed to the Lomé Convention, which expired the 29 February 2000, granted ACP countries important trade preferences as traditional suppliers to the EU market of bananas, beef, sugar and rum, through quota systems and customs duty preferences. These protocols, by providing up to certain limits, guaranteed volumes and prices for the ACP producers’ exports of these products, helped to minimise the risks arising from fluctuations in the world market prices of the commodities concerned.


With the Lomé framework gone, the parties recognised the need to review the protocols in the context of new trading arrangements, in particular with regard to WTO compatibility, with a view to safeguarding the benfits derived therefrom. Stabex and Sysmin were instruments in the Lomé Convention designed to help ACP countries dependent on commodity exports to palliate the negative effects of price instability. These do not figure in the new Partnership Agreement and are replaced by a rather vague undertaking to provide ‘a system of additional support in order to mitigate the adverse effects of any instability in export earnings, including in the agricultural and mining sectors, within the financial envelope for support to long-term development’ (Article 68 new ACP-EU Partnership Agreement).

World commodity prices being notoriously volatile, driven by changes in global demand and supply, developing countries are particularly affected by external shocks that can result in increased poverty and reduced public funding for health and education. Early attempts to deal with commodity price volatility relied on stabilisation schemes set up in the context of international commodity agreements. These arrangements were largely unsuccessful. Globalisation of commodity markets and the lowering of trade barriers, along with priorities focused on sustainable development and poverty alleviation, call for a more innovative approach to commodity risk management. The concerns of all interested parties (traders, governments, producers, farmers) should be taken into account. Hardship resulting from falling commodity prices should be, as far as possible, alleviated in a balanced way, without farmers and the poorer segment of the population in developing countries paying the price.

Contents of the study
The study undertook an analysis of the dependence of developing countries on commodity exports, addressing the specific problems of the countries concerned, on a regional basis. The regions considered in particular were sub-Saharan Africa, South Asia, Latin America and the Caribbean. It illustrated trends in market prices for major commodities, including minerals and agricultural products, with reference to the supply, processing and export capacity of the producing countries. It looked at the changes taking place in international commodity markets and how developing countries can be better equipped to deal with new developments. The study helped identify major constraints faced by developing countries in responding to the global evolution of world commodity markets. It clarified the appropriate instruments, which assists commodity-dependent developing countries to cope with the difficulties resulting from commodity dependence. It proposed workable policies and strategies to reduce the negative effects of price fluctuations, to enhance price stability, economic growth and sustainable development and analysed in this context the impact of the new ACP-EU partnership agreement.

*** These are indicative figures as per the 6th. October, 2019.
*** Market prices are as at 05th. November, 2019
Top 5 tips for retailers looking to sell in China in 2019
****Continued from last week

3 – Always stay top of cross-border regulatory changes
In recent months, the Chinese government has issued a slew of new regulations which have changed the game for both gray-market ‘daigou’ sellers and those selling through cross-border e-commerce. For one, China’s new comprehensive e-commerce law (effective since January 1st, 2019) cracks down on daigou sellers by forcing them to register as businesses and file tax returns. If you’re a retailer that relies heavily on daigou for your revenues, then you should consider alternatives because this market is likely to shrink in 2019. China is also expanding the scope for cross-border e-commerce because this channel can be better tracked and taxed, when compared to gray-market daigou purchases. It also makes it easier for the government to regulate and protect consumers from fake goods, since they’re purchasing directly from overseas brands and retailers. In November, the government raised limits on CBEC purchases from 2,000 RMB ($289) per transaction and 20,000 RMB ($2890 per year to 5,000 RMB ($745) and 26,000 RMB ($3875), respectively. The government at the same time lowered import duties on inbound postal shipments. Postal duties for the top two tax brackets were reduced from 30 percent and 60 percent to 25 percent and 50 percent respectively.

4 – Beware of the changing e-commerce environment
In 2018, several retailers announced the closing of their Tmall stores, with some opting to exit the China market altogether. US department store chain ‘Macys, British apparel retailer New Look, and Hong Kong health & beauty chain ‘Watsons are the latest players to announcetheir departures from Tmall, likely due to lackluster Singles Day sales and high commission fees. This is partly because large platforms such as Tmall,, and Netease Kaola are increasingly procuring inventory in bulk, directly from brands and at reduced prices. This makes it difficult for multi-brand retailers on their platforms to compete since they oftentimes sell the same popular brands and it’s very easy for customers to compare prices online. Big companies such as Tmall also benefit from economies of scale and can stock inventory in bonded warehouses in China, where they can be shipped out at a moment’s notice and arrive at their destinations within just a few days. An overseas retailer such as Macy’s in the US can take as long as 20 days to ship their orders to customers in China. Retailers should think long and hard about how they can differentiate themselves, and whether their products are compelling enough for customers to wait for cross-border shipping.

5 – WeChat mini-stores may hold the key for smaller brands and retailers
Big brands such as Dior or Lancôme are launching innovative marketing campaigns on WeChat to drive traffic and sales to their mini-program stores. Some of the features that are being built into mini-programs to increase e-commerce conversion rates are cosmetics tutorials, live-streaming influencers, and interactive games. WeChat now makes it feasible for brands to both push content and at the same time sell products, thus creating a closed loop of customer interactions that can be completed within the WeChat ecosystem. Mini-program stores are more visual and accessible, given their 10-megabyte size limit, making it easy for customers to share engaging promotions with one another. Given WeChat’s large user base, mini-program stores may give a fighting chance to smaller brands who cannot get on larger marketplaces or don’t want to pay their high fees. Emerging US baby lotion brand Ever Eden and UK cosmetics retailer FeelUnique are also some of the first to launch cross-border WeChat mini-program stores, which are equipped with cross-border payment solutions and logistics tracking features for goods shipped from overseas.
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