Daily Brief: The World’s Commodities Are Suddenly Worth Their Weight In Gold

Daily Brief: The World’s Commodities Are Suddenly Worth Their Weight In Gold

almost 3 years ago3 mins

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The prices of commodities have hit their highest levels in almost a decade, as everything from copper to lumber becomes worth its weight in gold in the post-pandemic recovery.

What does this mean?

Metals, food, and energy are the bread and butter of any growing global economy, but lately there have been supply problems with all three. China’s been cutting steel production citing environmental concerns, while striking port workers in Chile – where a quarter of the world’s copper is produced – are threatening to delay supply of the red metal. Transportation hiccups have been an issue too, and so has the damage to crop yields from poor weather.

Commodity boom

That imbalance between supply and demand has conspired to send a key index of commodity prices up 70% from last March’s lows. That’s its highest level since 2011. In fact, soybean prices are up about 50%, corn over 40%, and copper and oil around 30% this year alone.

Commodity surge

Why should I care?

For markets: There’s plenty more where that came from.

The eurozone economy shrank last quarter, so there’s a lot of potential growth up for grabs in the region. And that – as investing heavyweight Pimco has pointed out – could push demand for commodities even higher. It’s a trend investors look like they’re already well aware of: basic materials companies in Europe – think paper manufacturers and mining firms – kicked off Wednesday as the market’s best-performing stocks, which means your investment in Dunder Mifflin could finally be about to pay off in a big way.

Zooming in: Wood comes good.

A resurgent US housing market has boosted demand for lumber in recent weeks, sending wood prices soaring. That’s not ideal news for home buyers or home fixer-upperers who are now forced to cover the higher costs, but it certainly bodes well for Home Depot and Lowe’s first-quarter updates later this month.

Keep reading for our next story...

Watch Out Oatly: Nestlé's Coming For Plant-Based Milk

Peas image

Nestlé announced on Wednesday that it’s entering the plant-based milk market, as it vies to give the world’s heavy-hitters some healthy – very healthy – competition.

What does this mean?

While the world’s biggest food company has been expanding into meat substitutes for a while, it’s been slow to tap into the huge and growing demand for plant-based milk that’s been fueled by environmental and nutritional concerns. But unlike the competition that mostly uses soy, almonds, or oats for their plant-based milks, Nestlé’s opted to create “Wunda” using protein-rich peas. Only time will tell if that was a smart decision: pea milks have got some flack for their weird “legumey” taste in the past…

Consumers flock to new ingredients

Why should I care?

The bigger picture: It’s getting cosy in the plant-based sector.

Clearly Nestlé’s looking to quaff a share of the plant-based dairy market, which was worth $16 billion in 2019 and is anticipated to hit $41 billion by 2025. But the company’s not short of rivals: it’ll be going head to head with French dairy giant Danone’s Alpro and Silk, as well as young upstarts Chobani, Planet Oat, and Califia Farms. At least Nestlé has something the new kids on the block don’t: an extensive distribution network that’ll enable it to effortlessly roll out new products across the world’s retail outlets.

Global dairy alternative market

For markets: Oatly schmoatly.

Nestlé’s Wunda range will include a barista-approved milk designed for steaming and frothing. That’s a pretty direct clapback at Oatly, whose own barista-style oat milk is used in every Starbucks store across the US. And if that wasn’t enough of a declaration of war, Nestlé’s announcement came just as Oatly prepares for a stock market debut that could value it at as much as $10 billion. Still, the company’s recent filings showed that it doubled its sales to $421 million in 2020, so if Nestlé’s coming at the plant-based king, it’d best not miss.

Oat milk second most popular
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