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

    'Like science fiction,' Seattle startup sends laser-equipped robots to zap weeds on farmland

    This article from the Seattle Times may be of interest to subscribers. Here is a section: 

    Over the next decade, the Western Growers Association aims to automate half of the harvest of specialty crops, which include fruits, vegetables and nuts. A Florida company has been developing a strawberry-picking robot. At Washington State University Tri-Cities, scientists are working on an apple-picking robot — an idea some farmworker advocates met with skepticism. 

    Edgar Franks, political director at the union Familias Unidas por La Justicia, based in Burlington, Washington, said that, generally speaking, the rise of automation is concerning. Farm work is grueling “because of the exploitation of labor,” he said.

    “From our point of view, it’s all about labor control and cutting labor costs down…What’s going to happen to the workers who made the industry so profitable, all of a sudden to be kicked out?” Franks said.

    Myers said it has become more difficult to hire people for work like weeding. This year, 80% of the migrant workers he planned to hire on temporary H-2A visas are delayed at the U.S.-Mexico border, he said.

    “It’s harder to find people to do that work every single year,” he said. 

    Mikesell declined to provide an exact cost of the robot, but said its price is in the hundreds of thousands of dollars, comparable to the cost of some tractors. 

    The weeding robot, manufactured in Mukilteo, uses GPS technology to stay within a geofence at the edge of the field. Cameras underneath the robot scan the ground and artificial intelligence identifies the weeds among the crops. 

    Then a carbon dioxide laser (the same kind used to cut metal) “targets the weeds for destruction,” in the words of the company’s website. The company says the machine can weed 15-20 acres per day. 

    Developing the machine meant troubleshooting to ensure that the lasers and robot could withstand hot and freezing temperatures, plus rain, dust and lightning – to match the “general ruggedness of farm equipment,” Mikesell said.

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    Container Shipping Insights The 'mega' trend to continue

    Here is a section from a JPMorgan report focusing on shipping costs.

    Global liners are stepping up de-carbonization efforts and experimenting with alternative fuels
    To achieve the industry target, many global liners such as A.P. Moller Maersk (viewed an industry bellwether) are stepping up de-carbonization efforts, recently unveiled plans to fast-track its de-carbonization efforts, with a target to put the world’s first vessel powered by carbon-neutral fuel into operation in 2023, seven years ahead of its original schedule. Specifically, Maersk will install its smaller feeder vessels (capacity of around 2,000 TEUs) with dual fuel technology, power them using alternative fuels including methanol (produced from plant waste) while retaining the option to use VLSFO if necessary. Maersk is also currently experimenting with other alternative fuels including ammonia. Looking ahead, Maersk targets to operate more methanol-fueled vessels in the future and expects methanol and ammonia to emerge as more viable future fuel options.

    Adoption of new technology and alternative fuels will take time to achieve commercial feasibility. There are inherent limitations towards adopting alternative fuels. Referencing remarks made by Mr. Morten Bo Christiansen (Maersk head of de-carbonization), methanol has the potential to reduce CO2 emissions by up to 15% vs conventional marine fuels while enjoying other advantages including having well-established infrastructure and manageable vessel retrofitting cost. Having said that, methanol has inherent limitations including low energy density and certain safety-related challenges. With respect to ammonia, Maersk expects ammonia to be an ideal replacement from a net zero carbon perspective, but overall technology capability remains at a nascent stage and no vessels today are equipped to utilize this fuel type. Maersk also takes a contrarian view compared to its peers and does not view Liquefied Natural Gas (LNG) as a viable alternative, given its upstream and onboard emissions.

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    Longer-Run Economic Consequences of Pandemics

    This report from the San Francisco Fed may be of interest to subscribers. Here is the conclusion:

    Summing up our findings, the great historical pandemics of the last millennium have typically been associated with subsequent low returns to assets, as far as the limited data allow us to conclude. These responses are huge. Smaller responses are found in real wages, but still statistically significant, and consistent with the baseline neoclassical model.

    Measured by deviations in a benchmark economic statistic, the real natural rate of interest, these responses indicate that pandemics are followed by sustained periods—over multiple decades—with depressed investment opportunities, possibly due to excess capital per unit of surviving labor, and/or heightened desires to save, possibly due to an increase in precautionary saving or a rebuilding of depleted wealth. Either way, if the trends play out similarly in the wake of COVID-19 then the global economic trajectory will be very different than was expected only a few months ago.

    Should we expect declines of 1.5%–2% in the real natural rate, however? There may be at least three factors that could possibly attenuate the decline of the natural rate predicted by our analysis, but their presence and magnitude is uncertain and unknowable until therapies to fight COVID-19 are more developed. First, the death toll of COVID-19 relative to the total population might be smaller than in the worst pandemics of the past, but we cannot know for sure at this point. Second, COVID-19 primarily affects the elderly, who are no longer in the labor force and tend to save relatively more than the young, so the demographic channels could be altered, although the recent pick up in infections is now affecting younger individuals. Third, aggressive counter-pandemic fiscal expansion will boost public debt further, reducing the national savings rate and this might put upward pressure on the natural rate, even though our analysis suggests that this expansion of public debt should be easier to sustain in the long-run.

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    A Chipmaker's Advice to the Auto Industry

    This interview with the head of automotive at Global Foundries (ahead of the company’s IPO) may be of interest to subscribers.

    Fixing The Chip Crisis
    It’s been almost five months since the global chip shortage surfaced as a serious problem for the auto industry. Some experts say it could take a year before automakers emerge from this expensive supply-chain hell.

    The consequences will last much longer as the pandemic forces car companies to rethink how they manage their supply chains. Lead times for automotive chips already were lengthening before Covid-19 lockdowns, as the auto industry became a bigger semiconductor customer than ever before. That's because systems that alert drivers when they drift out of a lane and better harness an EV battery require more data processing than yesterday’s power windows and car radios.

    I recently spoke with Mike Hogan, the head of automotive at Global Foundries, a chipmaker that has plants in the U.S., Europe, and Asia. Since autos consume just 10% of global chip production, car companies usually buy consumer electronics chips off the shelf. Hogan says that with electrification and autonomy transforming vehicles, automakers have to look more deeply into their supplier networks.

    Here are excerpts from our discussion, edited for length and clarity:
    Where are we now, is this going to get worse? When will the shortage ease?
    The first wave of help [for automakers] is probably a third-quarter thing.

    It’s very hard to tell if there’s a shortage hiding behind a worse shortage. Because auto is so diverse, there are so many different kinds of semiconductors that go in there — if the auto guys don’t know what they need, how do they know they don’t need something else that they don’t see yet? That’s the real concern.

    So I think it could be very lumpy trying to get out of this. Is that unique to the auto guys — versus someone who makes a smartphone or an iPad?

    The folks who make smartphones, they don’t outsource the design to a bunch of people. They tightly control everything that goes in that smartphone. Even to the point where they say, ‘Look, Global Foundries, I want to make sure it’s there, so I’ll prepay for it, I will reserve the capacity. If I don’t take it on the day, you thought I was showing up, it doesn’t go anywhere because we’ve already pre-paid.’
    People often talk about how making cars is such a low-margin business, it has to be done this way.

    Do you think that’s true?
    If you can’t build a $50,000 car and ship it and put all those people to work because you don’t have $15 worth of semiconductors...I think it’s time to shift that and say, ‘No, we’re the auto market, we have very unique needs, we need an architectural approach to building our cars, we don’t need to
    buy retail off-the-shelf stuff.’ Then you have the real conversation ahead of time, versus, ‘Hey you don’t know me but I’m out of chips and it’s your fault buddy.’

    Is that starting to happen?
    There are a lot of good, smart people in auto that have seen this. This is the moment that gives that cohort within those companies the voice to say, ‘This is exactly why we needed to think different.’ I think you’ll see more of this direct relationship between autos and semiconductors.

    Can chip factories in the U.S. compete with lower-cost producers in Asia?
    We built a factory from the ground up in upstate New York. It cost billions, but there’s over 3,000 people working there. Are those 3,000 people getting paid a little more than the 3,000 people in Korea? Yeah, probably. But if you build enough wafers, it’s still very competitive. Part of this might be tilting some advantage for folks to use the domestic supply that we create, but that’s how it is everywhere in the world.

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    China Blasts Australia's Decision to Cancel Belt and Road Deal

    This article by Jason Scott for Bloomberg may be of interest to subscribers. Here is a section:

    The Australian federal government scrapped both the memorandum of understanding and framework agreement signed between Victoria and China’s National Development and Reform Commission, Beijing’s top economic planning body, Foreign Minister Marise Payne said in an emailed statement Wednesday. She described the deals as “inconsistent with Australia’s foreign policy or adverse to our foreign relations.”

    The step “is another unreasonable and provocative move taken by the Australian side against China,” the Chinese embassy in Canberra said in an emailed statement. “It further shows that the Australian government has no sincerity in improving China-Australia relations -- it is bound to bring further damage to bilateral relations, and will only end up hurting itself.”

    Australia “basically fired the first major shot against China in trade and investment” conflicts, Chen Hong, director of the Australian Studies Center at East China Normal University in Shanghai, told the Communist Party-backed Global Times. “China will surely respond accordingly.”

    China has lodged stern representations with Australia over the issue and reserved the right to take more action, Foreign Ministry spokesman Wang Wenbin said at a regular press briefing Thursday in Beijing.

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    Corn, Soybeans, Wheat Surge on Chinese Demand, Weather Woes

    This article by Bre Bradham and Megan Durisin for Bloomberg may be of interest to subscribers. Here is a section:

    Corn jumped by the exchange limit and soybeans topped $15 a bushel for the first time since 2014 as China’s rampant demand and adverse weather around the world threaten to further tighten supply.

    Brazil’s second-corn crop is suffering from drought, and U.S. planting has been slowed by a record cold snap that may also have damaged some winter wheat. Meanwhile, western Europe lacks moisture for early growth of the grain, helping push up wheat futures and adding to worries about global food-price inflation as consumers still contend with the coronavirus pandemic.

    The weather concerns in major growers come amid signs of continued strong demand, particularly in China, which the U.S. Department of Agriculture expectsto import a record 28 million metric tons of corn. The country is already scooping up the next U.S. crop. Soybean oil futures jumped by the most allowed, amid growing demand for renewable diesel.

    “It’s an incredible rally. It is primarily the weather and demand and low stocks that are really driving this thing, and the realization that Brazil could have a poor second corn crop,” said Jack Scoville, a vice president for Price Futures Group in Chicago. “There’s just nothing going on that says sell the market.”

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    Oatly Reveals Growing Losses, Revenue in U.S. IPO Filing

    This article by Crystal Tse for Bloomberg may be of interest to subscribers. Here is a section:

    Oatly Group AB, the vegan food and drink maker, has filed for a U.S. initial public offering.
    The Malmo, Sweden-based company, in a filing Monday with the U.S. Securities and Exchange Commission, listed an IPO size of $100 million, a placeholder that will likely change.

    Oatly reported a $60 million loss on $421 million revenue in 2020, compared with a loss of $36 million on revenue of $204 million a year earlier.

    The company counts Chinese conglomerate China Resources Co., Swedish private equity firm Verlinvest and Blackstone Group Inc. among its biggest shareholders, the filing showed. Morgan Stanley, JPMorgan Chase & Co. and Credit Suisse Group AG are leading the offering. Oatly plans to list on Nasdaq Global Select Market under the symbol OTLY.

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    Chemical Maker Elementis Rejects Third Deal Offer in Five Months

    This article by Craig Trudell for Bloomberg may be of interest to subscribers. Here it is in full:

    U.K. specialty-chemical company Elementis Plc turned down a third acquisition offer in five months, a move that risks further irritating investors who have missed out on potential deals.

    Rival Innospec Inc. said Tuesday it is no longer considering an acquisition of Elementis after the latter company’s board rejected a 160 pence per share offer made late last month. Elementis shares pared a gain of as much as 22% to trade up just 1% at 137 pence.

    Elementis rebuffed two earlier offers that another U.S. foe, Minerals Technologies Inc., made in November of last year. J O Hambro Capital Management Ltd., a top investor in Elementis at the time, told Bloomberg News it had concerns about management’s strategy and the board’s refusal to enter into discussions with Minerals Technologies. Sky News first reported on Monday that Elementis had
    received takeover interest from Innospec.

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    Midas Touch

    Thanks to a subscriber for the report from Celtic Gold which may be of interest to subscribers. Here is a section on seasonality:

    In the current year, the gold price seems to be running two months ahead of its seasonal pattern established over decades. The top on January 6th was followed by a clear wave down lasting almost three months until the end of March. This correction would actually have been more typical for the period March to June. With the double low reached at the end of March, the beginning of the usually strong summer phase would be conceivable from May or June this year. In the short term, seasonality continues to urge patience. At the very latest, the gold price should be able to take off again from the beginning of July.

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