284 (28 September 2016)

Welcome to week 284!  The articles below caught my attention this week.  Please note that what are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may frequently be found by an Internet title search.

(22 September 2016): “Bloomberg’s Fifty Most Influential” (https://www.bloomberg.com/features/2016-most-influential/)

********The list shows “who commands the most power in financial markets.”  At 1 is Theresa May, the Prime Minister of the United Kingdom; at 50 is comedian John Oliver, who was born in the United Kingdom.  In between there is a varied lot, including a surprising number of economist, headed by Janet Yellen, at position eight, just ahead of Warren Buffett.  There are fifty blurbs with brief introductions indicating the many ways one can influence financial markets.

(23 September 2016): “Cowboys Turn to High-Tech Ear Tags to Monitor Animal Health” (http://www.wsj.com/articles/cowboys-turn-to-high-tech-ear-tags-to-monitor-animal-health-1474363802)

——–“Drugmakers, startups and cattlemen are betting that sensors and data-sifting software can help keep cattle in Western U.S. feedlots healthier than cowboys can alone.  New tags clipped to animals’ ears aim to monitor movement and feeding patterns for early signs of sickness.  With low cattle prices pinching ranchers’ profits, developers believe they can save feedlots money on drugs like antibiotics and avoid treating healthy cattle.  The tactic also appeals to some health officials and consumers who say antibiotics are overused.”

********Not exactly a Fitbit for cattle but moving in that direction.  One company providing the ear tags, Quantified Ag, “currently charges around $18 an animal” for its service.  The tags are being developed, in part, to deal with the perception that “Cowboys are somewhat of a dying breed.”  Will the ears tags make them even less in demand?  You can learn more about Quantified Ag at: http://quantifiedag.com/.  Ear tags are especially important on feed lots, where most cattle are raised.  There is an interesting four-minute video on the site that provides a glimpse into the thinking behind the development of the tag system.

(23 September 2016): “Supermarkets Make Stars Out of Weird Apples, Knobbled Carrots and ‘Spuglies’” (http://www.wsj.com/articles/in-supermarkets-now-weird-apples-knobbled-carrots-and-spuglies-1474561531)

——–[This is the A-Hed (quirk) article.]  “Steve Lutz used to sell banged-up apples for a loss on the juice market.  Until the day Wal-Mart called.  Suddenly, his company was hauling unattractive apples, which had been pelted by hail, out of storage.”  Lutz says that his company wasn’t trying “to produce ugly produce” but everything changed when “Wal-Mart Stores Inc. started an ugly-apple pilot project this summer at 300 Florida stores.”  Now Lutz worries “about keeping up with demand.”  Across the U.S., “Growing appreciation for homely crops, which generally cost less, is giving new life to funny-looking fruit and vegetables.  Marketers are trying to cast former castoffs in more flattering light.  And growers have turned into judges of produce beauty pageants.”

********Those concerned with food waste have helped advance the cause of ugly fruits and vegetables.  According to ugly-evangelist Jordan Figueiredo, the “key to getting people into ugly food is to provide the vegetables and fruit with some personality.  The number of followers on his Twitter account boomed when he started taking a more playful approach to his work.

(24 September 2016): “One of India’s most-populous states recently banned alcohol.  Mayhem ensued.” (https://www.washingtonpost.com/world/one-of-indias-most-populous-states-recently-banned-alcohol-mayhem-ensued/2016/09/23/b25090b8-743e-11e6-9781-49e591781754_story.html)

——–“Alcohol is not illegal in predominantly Hindu India, but there has long been a social stigma against it in this conservative country, and state-level bans have become a popular ploy for politicians in India anxious to secure the women’s vote.”  Although drinking “is on the increase in India, with rising middle-class affluence, a youth bulge and increased opportunities to dine out . . . rural female voters are becoming more assertive about the predations of alcoholic husbands, and this has become a potent election issue.  The southern state of Kerala has begun a phased ban, and neighboring Tamil Nadu is contemplating introducing such a prohibition again after a lapse of several years.  But the man who has made the issue his own is the chief minister of Bihar, Nitish Kuman, who instituted the controversial ban after an election-year promise to women voters who complained about their drunken husbands.”

********Evidently these are not elections without consequence.  “The anti-alcohol campaign has sent more than 14,000 people to jail since April in a state where the prisons were already overcrowded. . . . Those caught consuming alcohol can face 10 years in prison, and bail can take weeks.  But what has set off panic among residents are the draconian provisions in the law, including a clause whereby all adults in a family are now accountable if one member drinks.  You can learn more about the state of Bihar, with a 2011 population of 104 million, at: https://en.wikipedia.org/wiki/Bihar.  For comparison, the U.S. population in 1920, when Prohibition began, was 106 million (https://en.wikipedia.org/wiki/1920_United_States_Census).  Perhaps cultural differences will enable this modern prohibition to persist.

(27 September 2016): “A New Debate Over Pricing the Risks of Climate Change” (http://www.nytimes.com/2016/09/27/business/energy-environment/a-new-debate-over-pricing-the-risks-of-climate-change.html)

——–“Some companies, including ExxonMobil, say the economics of climate change are too hard to predict for them to give investors hard numbers about the business impact of global warming.  Federal regulators may disagree and are considering requiring Exxon to do just that for its oil reserves.  Now a long-shot legislative effort by a Florida congressman to prevent such a move by the federal government has become an unexpected flash point in the battle over disclosing climate-related risks—with potentially hundreds of billions of dollars in the balance.  ********The congressman is Representative Bill Posey of Florida.  The so-called “Posey amendment” would allow, among other things, “real estate companies to stay mum on the risks posed to waterfront properties by rising seas, for example, and let food companies leave the impact of future water shortages unaddressed.”  In short, the amendment if adopted would undermine the value of almost all risk disclosures required by the Securities and Exchange Commission.  One group actively involved in examining how to assess the financial risks behind climate change is the Task Force on Climate-related Financial Disclosure (https://www.fsb-tcfd.org/); another group working in the area is the Sustainability Accounting Standards Board (http://www.sasb.org/).  The chief executive of the SASB, Jean Rogers, notes: “Climate risk is the most ubiquitous risk out there . . . There’s no excuse anymore [to ignore them].  We know what the risks are, industry by industry.”

********One of the interesting arguments reported in the article is to the effect that climate-related risks are hard to measure precisely, so we shouldn’t try to measure at all.  This is a familiar argument, especially for someone who has spent almost all of his adult life in higher education—just substitute ‘learning is’ for ‘climate-related risks are’.  Clearly what we need is a more sophisticated notion of measurement.

(27 September 2016): “Trouble Brewing in the Craft Beer Industry” (http://www.wsj.com/articles/trouble-brewing-in-the-craft-beer-industry-1474990945)

——–Craft brewers like Creature Comforts Brewing Co. of Athens, Georgia are outgrowing their supply chains.  “The brewer has had so much trouble finding enough of a special type of hops called citra . . . that it has been forced to reject orders for about 8,000 barrels of beer during the past year.  That is more than $2 million in revenue and enough beer to nearly double production.”  Regional brewers including “Wicked Weed Brewing of Asheville, N.C., and MadTree Brewing of Cincinnati have run into similar constraints.  The shortages are contributing to the sudden slowdown in craft beer sales.  During the first half of the year, independent brewers’ volumes grew about 8%, ending six years of double-digit growth.”  The problems “isn’t lack of hops productions. . . . The problem is the rapid proliferation of tiny beer brands from a fiercely competitive and rapidly expanding craft beer industry.  Beer drinkers now have an estimated 30,000 different choices from 4,000-plus brewers to pick from, compared with about 20,000 beers from 2,000 brewers five years ago, according to the Brewers Association.”

********The article notes, many small brewers create challenges for hops suppliers, since the suppliers don’t know if the specialty hops wanted by them will still be wanted in the event the brewers go out of business.  As a result, “Brokers and so-called hop merchants try to bridge that divide by acting as middlemen—ordering in bulk for several brewers—in addition to storying and shipping hops for them.  But that doesn’t always solve the problem with today’s unpredictable consumers.”  Like other products, the beer fad of the day may fade quickly.

********At the other end of the size distribution of firms there is AB InBev and SAV Miller.  Shareholders of both firms just approved the merger of the two companies in a deal worth over $100 billion.  “Regulators around the world have already approved the deal, which AB InBev says will create ‘the first truly global brewer.’  The takeover is expected to be formally completed on Oct. 10.”  You can learn more about the merger at: http://www.chicagotribune.com/business/ct-ab-inbev-sabmiller-merger-megabrew-20160928-story.html.  Will this affect craft brewers or will the merger principally allow AB InBev to generate more profit from its now expanded mass-market beers through cost reductions?  Cost reduction have been a focal point of past mergers by AB InBev.

May you have a good week!


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