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David Fuller and Eoin Treacy's Comment of the Day
Category - Precious Metals / Commodities

    ESG in practice: assessing Food and Beverage companies' externalities

    This report from the Candriam Academy may be of interest. Here is a section:

    The market of protein foods is witnessing two key developments. The first is the efficiency drive, through new technology, among existing producers of animal protein food, such as milk, meat, fish or eggs. Better efficiency comes with smaller carbon footprint; indeed, the top 10% best performing farming businesses reduce theirs by double digits by adopting new innovative solutions.

    Even more good news for companies: because most of the innovations work alongside existing production systems, their implementation will not require additional capital expenditure. There are also some products that target specific issues, such as cows belching methane – a greenhouse gas more potent in causing global warming than carbon dioxide. We now have a remarkable innovative food supplement that can suppress the production of methane by 30% in dairy cattle, and up to 90% in beef.

    The second type of innovations is about finding new sources of non-animal proteins. Everything from using canola to single cell proteins. Recent study reported that “considerable progress has been made towards the development and production of meat alternatives, including cultured meat, plant-based meat alternatives, microbial protein, edible fungi, microalgae, and insect protein.”

    We expect a combination of advanced scientific expertise and investment will be required in the years to come not only to develop new sources of proteins but also test how safe they are for human health and well-being. In the meantime, the diet is not the only factor that impacts our climate and other sustainability factors, it is also the operation of the supply chains themselves.

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    A New World Energy Order Is Emerging From Putin's War on Ukraine

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    “The U.S. can try to make Saudi Arabia increase production, but why would they accept a break in the alliance, which is key for them?” said Paolo Scaroni, former chief executive officer of Italian oil company Eni SpA. 

    There’s a political dynamic at play to explain the kingdom’s fidelity to Moscow beyond the gusher of oil revenue. 

    Where Donald Trump cultivated a particularly friendly relationship with Saudi Arabia — making his first foreign trip as U.S. president to Riyadh — ties have turned colder under President Joe Biden. On the campaign trail, Biden pledged to make the kingdom a “pariah,” in part because of the killing of columnist Jamal Khashoggi. He will only deal with the elderly King Salman, relegating Mohammed bin Salman to interact with more lowly officials despite being the kingdom’s defacto ruler. 

    By contrast, Riyadh’s OPEC+ partnership with Moscow calmed years of distrust between the two oil rivals, and saved the kingdom from relying exclusively on Washington.

    “Saudi Arabia doesn’t want to switch horses mid-race when they do not know if the other horse is actually going to show up,” said Helima Croft, chief commodities strategist at RBC Capital Markets. 

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    Fund Manager's Diary March 9th 2022

    Thanks to Iain Little for his latest note which may be of interest. Here is a section:

    Third, fixed income markets, largely reward-free risk pre-Ukraine, now face a further knock-out blow. The pressure for rate rises justified by existing 5%+ inflation will be ramped up by the commodity scarcity from sanctions on 12% of the world’s oil production and much of its strategic metals. Add a negative credit effect on bond yields derived from civil unrest in countries relying on imported wheat to feed youthful, volatile populations; Ukraine, at 30% of global total, is the world’s largest supplier. The only cure is a lighter hand on the rate rise tiller from central banks now wary of recession 12-18 months from now. This contradiction is negative for long rates.

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    Israel's tortured choice on Russia

    This article from the Jerusalem Post may be of interest. Here is a section:

    So, perhaps Jerusalem is right to walk a fine line with Moscow and prioritize strategic over moral concerns. Perhaps, but it’s distressingly difficult to watch. In essence, Israel has muted its voice as Russia slaughters Ukrainian innocents, while threatening the liberal order from which Israel greatly benefits.

    Strategically, Israel is heavily dependent on Russia in at least two ways. First, Russia controls most of the airspace over Syria, and has permitted Israel to strike targets there, including Iranian weapons facilities, as well as weapons convoys designed for Lebanon’s Hezbollah terrorist group, which is positioned just over Israel’s northern border.

    Second, Russia is one of five permanent UN Security Council members and, as such, is participating in negotiations in Vienna over reviving the 2015 global nuclear deal with Iran. While Washington seeks to resuscitate the deal in hopes of restraining Iran’s nuclear progress, Jerusalem fears that a new deal will pose the same problems as the original one – including sunset dates for restrictions on Iranian nuclear activities, a weak international regime for inspecting Iranian nuclear sites, and no curbs on Iran’s related and growing ballistic missile program.   

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    Ukraine Open to Neutrality But Won't Yield Territory, Aide Says

    This article from Bloomberg may be of interest. Here is a section:

    Ukraine is open to discussing Russia’s demand of neutrality as long as it’s given security guarantees, though it won’t surrender a “single inch” of territory, a top foreign policy aide to President Volodymyr Zelenskiy said.

    “Surely, we are ready for a diplomatic solution,” Ihor Zhovkva, Zelenskiy’s deputy chief of staff, said in an interview with Bloomberg Television on Wednesday. 

    The aide reinforced Ukraine’s demand for security guarantees “from the U.S., from Great Britain, from Germany” and others -- “only security guarantees from Russia will not be enough,” though he declined to spell out what those measures would entail. 

    Preconditions for talks with Russian President Vladimir Putin would be a cease-fire and the withdrawal of Russian troops, Zhovka said.

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    Biden Says U.S. Will Ban Russian Fuels to Pressure Putin on War

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    President Joe Biden said the U.S. will ban imports of Russian fossil fuels including oil, a major escalation of Western efforts to hobble Russia’s economy that will further strain global crude markets.

    “We’re banning all imports of Russian oil and gas and energy,” Biden said Tuesday at the White House. “We will not be part of subsidizing Putin’s war.”

    The U.S. move will be matched in part by the U.K., which will announce a ban on Russian oil imports on Tuesday, though it will continue to allow natural gas and coal from the country. Other European nations that rely more heavily on Russian fuels will not participate. The scope of Biden’s action was not immediately clear, including exceptions and the impact on shipments already in transit.

    Biden’s move is a significant step in his sanctions campaign against Russia after its invasion of Ukraine. While so-called self-sanctioning by the oil industry has limited some purchases of Russian barrels, an outright U.S. ban would further weigh on the market and increase volatility.

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    Satellite outage knocks out thousands of Enercon's wind turbines

    This article from Reuters may be of interest to subscribers. Here is a section:

    Germany's Enercon on Monday said a "massive disruption" of satellite connections in Europe was affecting the operations of 5,800 wind turbines in central Europe.

    It said the satellite connections stopped working on Thursday, knocking out remote monitoring and control of the wind turbines, which have a total capacity of 11 gigawatt (GW).

    "The exact cause of the disruption is not yet known. The communication services failed almost simultaneously with the start of the Russian invasion of Ukraine," Enercon said in a statement.

    The company said it had no further information on who or what may have caused the disruption.

    Enercon has informed Germany's cybersecurity watchdog BSI and is working with the relevant providers of the satellite communication networks to resolve the disruption, which it said affected around 30,000 satellite terminals used by companies and organisations from various sectors across Europe.

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    Email of the day on lithium and rare earths

    Just renewed my subscription for another year. Keep up the good work!

    Reference your commentary on 25 Feb re Iain Little’s article on the effects of the Ukraine conflict and commodity supply, you may be interested in the attached research note by Maquarie on the growing strength of the lithium and rare earths supply/demand fundamentals.

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