A Tale of Commodities and Climate-driven Disasters

Abstract

This paper examines the impact of climate-driven disasters on commodity prices. Using extensive archival sources including census data and declassified CIA intelligence reports, I develop a global geospatial dataset to identify the locations of key commodity-producing sites at subnational level since the 1970s. By linking these regions to climate disaster events, I find that, over time, production has become increasingly concentrated in high-risk areas. Leveraging this dataset, I analyze how commodity futures respond to climate-driven shocks and uncover significant cross-sectional differences. Specifically, a long-only portfolio of vulnerable commodities yields a significant monthly alpha of 0.90%, whereas that of resilient commodities, albeit still significant, is negative at -0.43%, reflecting a premium paid for protection against climate shocks. Furthermore, I find that vulnerable commodities experience slower recoveries from past shocks.

Keywords: Commodities, Climate-driven disasters, Geospatial data

JEL Classification: C58, G13, Q54