Market Commentary: December 2020 Corn Futures

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. ***** 

Dan Zwicker makes a salient point about fundamental vs. technical analysis - by the time you get the balance sheet figured out its too late. ( https://lnkd.in/ep2-pPw ) Well this year  looking both at fundamentals and technicals the best I could, I would have never expected this bounce back in corn or any of the commodities. With negative crude prices early in the pandemic, I think I overestimated the long term impact of COVID on domestic demand and overweighted domestic demand period. Crude has returned to trading pre-pandemic levels lately. Never expected stocks to use to take us all the way back to levels like 2012-14 (after the drought). China coming in with purchases was not on my radar. Now there is the buzz of a weather market with South America. 

Although looking at the fundamentals - my two model projections did a decent job bracketing December corn futures....going back to Dan's point...could I figure out the balance sheet fast enough to provide trading or hedging value? 

(chart produced using R Quandl & quantmod)

***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. ***** 

Understanding the Distinctions Between Methane and Carbon From Livestock Emissions

This is a very nice video that gets into some of the key differences between the way methane behaves in the atmosphere vs. carbon, and the impacts on climate change. See also:

Cain, M., Lynch, J., Allen, M.R. et al. Improved calculation of warming-equivalent emissions for short-lived climate pollutants. npj Clim Atmos Sci 2, 29 (2019)

Getting the biggest nutritional bang for our climate buck (especially for that $4 Latte)

There are recent headlines about Starbuck's 2020 initiative to reduce their carbon footprint and part of that strategy is offering plant based alternative drinks vs the traditional dairy based ingredients.

https://www.marketwatch.com/story/can-starbucks-save-the-planet-by-cutting-dairy-activists-and-investors-respond-2020-01-21

No matter what you order at starbucks, the impact is probably minimal compared to the impact of simply how you get there.

Given that consuming #beef in the U.S. accounts for less than .5% of global greenhouse gas emissions, it's no doubt eating a salad in a restaurant or a veggie sub is less climate friendly than a steak at home. https://t.co/dVKTRx83k1

— Matt Bogard (@AgEconomist) January 26, 2020

Maybe you can get past that argument if you are combining trips.

But combining trips makes for a good analogy when it comes to the carbon footprint of our food.

How do we know we are getting the most nutritional bang for our climate buck. In a 2010 Food and Nutrition Research article, authors introduce what they are calling a Nutrient Density to Climate Impact (NDCI) index that takes this into account. According to their work:

"the NDCI index was 0 for carbonated water, soft drink, and beer and below 0.1 for red wine and oat drink. The NDCI index was similar for orange juice (0.28) and soy drink (0.25). Due to a very high-nutrient density, the NDCI index for milk was substantially higher (0.54) than for the other beverages. Future discussion on how changes in food consumption patterns might help avert climate change need to take both GHG emission and nutrient density of foods and beverages into account."

Just as combining trips and carpooling might be effective ways to reduce your carbon footprint getting the most out of every mile driven and gallon of gas used, we should be trying to get the most out of every bite we take and ounce we drink. Starbucks could help us do this by supporting our dairy farmers and emphasizing the very high NDCI for milk! After all, it does a body good.

HT: I found out about the NCDI via this related post by Michelle Payn https://causematters.com/advocacy/starbucks-environment-farmer/

References:

Smedman A, Lindmark-Månsson H, Drewnowski A, Edman AK. Nutrient density of beverages in relation to climate impact. Food Nutr Res. 2010;54:10.3402/fnr.v54i0.5170. Published 2010 Aug 23. doi:10.3402/fnr.v54i0.5170

Who Says Cows Aren't Making Meat Better?

According to Impossible Foods' 2019 Impact Report,  "Cows aren’t getting any better at making meat". I beg to differ.

For instance, consider Brad Johnson's work at Texas Tech related to increasing marbling and healthy fats without increasing unhealthy backfat while also reducing time on feed. Or like the research in beef genetics and air quality and emissions at U.C. Davis.

Its not just theory. In 2007 compared to 1977 we were able to produce the same amount of beef using roughly 30% fewer cattle and 30% less land. Feed and and water usage were down between 15-20% with a 16% lower carbon footprint (Capper, 2007). All in all, based on full lifecycle analysis, U.S. beef consumption accounts for less than .5% of global greenhouse gas emissions.

Cows are making meat better across a number of dimensions including taste, health, and the environment. And these technologies don't require scaling up 100 fold or doubling every year for the next 16 years.


See also the BEEF and LIVESTOCK INDUSTRY posts at my companion blog, Economic Sense.

References: 

Texas Tech University. "Increasing marbling in beef without increasing overall fatness." ScienceDaily. ScienceDaily, 5 May 2016. <www.sciencedaily.com/releases/2016/05/160505223115.htm>.

J. L. Capper, The environmental impact of beef production in the United States: 1977 compared with 2007, Journal of Animal Science, Volume 89, Issue 12, December 2011, Pages 4249–4261, https://doi.org/10.2527/jas.2010-3784

Some Beef and Meat Related Posts from the Incidental Economist

I'm a big fan of the Incidental Economist blog where I have learned a lot about healthcare economics. Recently healthcare economist Austin Frakt has shared some video monologues discussing meat, fake meat, health and the environment.

In the first video he discusses some recent research related to meat consumption and health, mainly there is no evidence that red meat presents a major health concern. And the challenge of observational data and research related to this:



However, in this  next video, I think the facts being referenced are making some assumptions that need clarification. Mainly, there seems to be an assumption that beef produced and consumed in the U.S. is exchangeable with beef produced in developing countries or that land devoted to beef production is exchangeable for land that could be used for food production purposes. Reducing consumption of beef in the U.S. likely won't have the impacts on consumption in other countries in the simplified way this story is often told.  U.S. beef accounts for .5% or less of global greenhouse gas emissions accounting for fossil fuel and grain consumption, as well as land use alternatives. And most of the land used for beef production isn't suitable for any other type of food production. Ruminants are able to convert inedible plant and fiber on marginal lands to highly palatable nutrient dense food sources. Adding a little grain (accounting for ~ 7% of the U.S. corn crop) can shorten the time grazing and increase production actually decreasing lifecycle greenhouse gas emissions.



I
n this final video, Dr. Frakt discusses how alternative/fake meat products are in fact NOT a healthier alternative to real beef:

Will Eating Less U.S. Beef Save the Rainforests?

There are often some common misperceptions about beef consumption. One is that eating less beef is one lifestyle change that can have a major impact on reducing your carbon footprint. However, if you live in the U.S. and eat U.S. beef, it's likely to be very minimal. U.S. beef accounts for just .5% of global greenhouse gas emissions. There are probably a number of other quite arbitrary lifestyle changes that could have a similar impact that would allow you to have your steak and eat it too. U.S. beef is just not exchangeable for other sources of beef.

The counter to this is often that if we reduced consumption in the U.S. our more sustainable beef could be exported to other countries, reducing the incentive to clear environmentally sensitive lands for beef production. However, as U.C. Davis air quality extension specialist Frank Mitloehner explains, again, U.S. beef is not exchangeable for other sources of beef produced other ways in other countries:

"In 1970, Americans consumed about 80 pounds of beef per person. Today? About 57 pounds. And in 1970, the U.S. exported less than 1 percent of its production but over 11 percent in 2018. Americans have long been doing their part according to this model. So, why is Brazil expanding its grazing area?

In short, they are different products serving different markets. Beef from Brazil is not the same as beef from the U.S., which specializes in producing well-marbled, grain-finished beef. Conversely, Brazilian beef exports tend to be grass-finished, leaner and in general lower-quality products. As a result, these two countries are producing beef for very different consumers – the U.S. is targeting higher-income countries for exports, such as Japan, South Korea and Taiwan, where demand growth is slower, whereas Brazilian beef is headed to lower-income consumers in countries such as China, Chile, Egypt and Iran, where demand growth is much faster. In short, any potential gains by U.S. consumption have been swamped by growing demand elsewhere.

Would increased U.S. beef exports eventually displace Brazilian beef exports in lower-income countries? Maybe, but it would take a considerable change in consumer choices and income in those countries. ....It’s just not that simple. Ultimately, a U.S. consumer eating less meat has not and will not displace consumption of Brazilian beef in Iran or China and therefore, decrease land expansion into the Amazon. That’s not how global beef markets work."