Analyse the impact of recent commodity prices on small businesses, include examples (9

marks)

The recent fluctuations in commodity prices have had a significant impact on small
businesses across various industries. The prices of commodities such as oil, metals, grains,
and the food products have been volatile in recent times, primarily due to factors such as
geopolitical tensions, supply chain disruptions, and changes in demand patterns. Here are
some ways in which the recent commodity prices have affected small businesses:

1. Increased input costs: Small businesses that rely on commodities as raw materials
have seen an increase in their input costs, reducing their profit margins. For
example, the rising cost of steel has impacted small manufacturing businesses that
rely on it for production.
2. Supply chain disruptions: Small businesses that rely on commodities that have
experienced supply chain disruptions have been negatively affected. For example,
the global pandemic caused significant disruptions in the food supply chain, which
increased the prices of food products, and small businesses that rely on these
products have been affected. At the same time, the war in Ukraine meant less was
available from Russia, putting further pressure on prices and reduced the amount of
grain available. Ending up pushing up food prices.
3. Changes in consumer behaviour: Changes in consumer behaviour have also impacted
small businesses. For example, the increased demand for commodities such as
recycled paper, which has increased its prices, affecting small businesses that rely on
it.
4. Changed in global trade policies: Changes in global trade policies have also impacted
small businesses. For example, the US-China trade war caused a significant decline in
the prices of soybeans, which affected small farmers who rely on it as a cash crop.

Here are a few examples of how recent commodity prices have affected small businesses:

1. A small furniture manufacturer that relies on imported wood saw an increase in the
cost of raw materials due to the rising cost of lumber in the market. As a result, the
company had to increase its prices, which caused a decline in sales.
2. A small restaurant that specializes in seafood saw an increase in the cost of shrimp
due to supply chain disruptions caused by the global pandemic. The restaurant had
to adjust its menu and increase its prices to cover the additional costs.
3. A small clothing manufacturer that uses cotton as a raw material saw an increase in
the cost of cotton due to global supply chain disruptions. The company had to find
alternative suppliers and increase its prices to cover the additional costs.

In conclusion, the recent fluctuation in commodity prices have had a significant impact on
small businesses. Small businesses that rely on commodities as raw materials, or those that
depend on them as part of their supply chain, have been affected by the rise in input costs
and supply chain disruptions. The changes in consumer behaviour and global trade policies
have also impacted small businesses in various industries.