Carbon Hoofprint

Bovaer is a cattle feed additive that inhibits production of methane by cows.

Christmas Eve is fast approaching, which got us thinking… Just how many miles does Santa cover delivering all those presents? Given the current environmental legislation, what is his carbon footprint, given the methane output of his reindeer—Dasher, Dancer, Prancer, Vixen, Comet, Cupid, Donner, Blitzen, and Rudolf?

Methane is about 28-times more potent at trapping heat compared with carbon dioxide. So, reducing the amount of methane in the atmosphere is even more crucial than tackling carbon dioxide if the world is to stand any chance of keeping to global warming targets. Some 40% of the world’s methane emissions come from agriculture, the majority of which is from livestock. Cows are the biggest culprits, although surprisingly this is from their burps, rather than flatulence as commonly thought. By the way, if you already knew this and could name all of Santa’s reindeer as well, then you will obviously destroy the in-laws when playing Trivial Pursuit this Christmas!

Anyway, returning to the methane challenge, scientists are developing inhibitors that restrict methane production in the gut of cows. These inhibitors come in various forms of animal feed including red seaweed and Bovaer, a brand name for the additive 3-Nitrooxypropanol (3-NOP). While results are varied depending on the country and breed of cow, in tests, methane emissions have been significantly reduced. However, as with any climate change action, it comes at a cost, as farming red seaweed or manufacturing 3-NOP is not cheap. The inhibitors also pose regulatory challenges as the main methane-inhibiting compound is an animal and human carcinogen.

Arla Foods has recently created a collective project with Morrisons, Tesco and Aldi to trial the use of Bovaer. These join M&S and Sainsbury’s who are believed to be trialling the feed additive. However, some anxious shoppers are threatening a boycott of milk from major supermarkets.

Meanwhile, some governments are introducing legislation to tackle livestock methane emissions. Denmark has agreed to implement the world’s first tax on agricultural emissions, which will come into effect in 2030.

The world’s population is growing, and incomes are rising, driving demand for animal protein, so livestock emissions are likely to rise without a means of tackling it. Spare a thought for Santa, who will need to expand his logistics capacity given global population growth. However, he can at least be grateful his elf-intensive operation is based in the North Pole, thereby avoiding Rachel Reeve’s National Insurance hike!

What have we been watching?

A tale of two cities? In another blow to the UK’s financial prestige, £28bn rental equipment provider Ashtead said it is preparing to shift its listing from London to New York on a 12 to 18-month view. However, this is understandable given it makes over 95% of its profits in the US. Meanwhile, across the pond, ‘Merger Monday’ saw $35bn of US deals announced as enthusiasm amongst American executives is beginning to return as many more clearly expect a more friendly environment under Trump’s administration. US inflation was in line with expectations, cementing a 0.25% interest rate cut by the Federal Reserve (Fed) ahead of Christmas. However, the US 10-year Treasury yield climbed back to 4.38%. The European Central Bank (ECB) cut interest rates by 0.25% as expected. Elsewhere, hopes were raised of further China stimulus measures as economic data continued to disappoint.

Donald Trump is going to have his work cut out in 2025 as geo-political events create an uncertain end to 2024. He called on China to help broker a ceasefire between Russia and Ukraine and help end the ‘madness.’ China, however, was angered by a visit to the US by Taiwan’s president. Meanwhile, the eventual outcome of events in Syria is far from clear. Israel confirmed that it had carried out airstrikes on Syria to target suspected chemical weapons and missile sites.

Taiwan was alarmed by unprecedented Chinese military activity. This included China’s largest naval fleet deployment in Taiwan’s regional waters in nearly thirty years. It follows the trip to the US by Taiwan’s president.

The US/China trade war continues its tit-for-tat actions. In the latest twist, China has launched an investigation into US AI chipmaker Nvidia for allegedly violating its anti-monopoly laws. This follows America’s recent decision to further restrict AI chip sales to China’s semiconductor industry. Meanwhile, the Biden administration has raised tariffs on Chinese solar wafers, poly-silicon, and some tungsten products to protect US clean energy businesses.

Read our latest UK investment insights from Alpha PM

 

In the UK, the Budget pain is starting to be seen in recruitment, which is falling more sharply than in other major economies. The slowdown is marked because it involves low-wage sectors, according to website Indeed, reflecting the National Insurance hike. Chancellor Rachel Reeves is calling for 5% spending cuts from government departments, with the exception of defence, under her spending review for 2026-29. This is an ambitious target, and if business and investor confidence do not improve next year, suggest even more tax increases. Meanwhile, the UK economy unexpectedly contracted for a second month-in-a row in October, declining by 0.1%.  

 

As expected, the ECB cut its deposit rate by 0.25% to 3% and re-iterated its well-rehearsed ‘we will follow data-dependent approach’ message regarding further cuts. However, the ECB is expected to continue to lower rates in 2025 given weak EU economic data. The ECB has lowered its 2025 Eurozone economic growth forecast from 1.3% to 1.1%. However, it has reduced its 2025 inflation forecast slightly to 2.1%.

 

US inflation in November was in line with expectations at 2.7%, cementing the chances of a 0.25% interest rate cut by the Fed ahead of Christmas. However, US economists are trimming their expectations for the pace of interest rate cuts in 2025 on fears that Trump’s policies will fuel inflation. Interest rates were expected to have fallen from 4.5%-4.75% to below 3.5% by the end of 2025, but the majority of economists now think rates could be 3.5% or higher. Meanwhile, the ‘Trump effect’ saw the NFIB small business confidence indicator jump from 93.7 to 101.7!

 

China’s politburo stated that Beijing ‘must implement more proactive fiscal policies and moderately loose monetary policies.’ Markets have been expecting more stimulus measures from the Chinese authorities, so this again raises the prospect of further action, albeit measures to date have fallen short of expectations. Meanwhile, Chinese exports increased by 6.7% in November, but this was weaker than expected, while imports declined by 3.9%, the sharpest fall since September 2023. Retail sales growth also weakened last month from 4.8% to 3%. Will China’s authorities keep their powder dry and await Trump’s inauguration before pushing the full stimulus button?

Read our latest investment insights from Alpha PM

 

Brent oil edged up to $74 as the outcome of the events in Syria remain far from clear, but this was partly offset by continued weak Chinese economic data.

Not quite finally! Some bad news for fans of mince pies which could see a 40% price jump after a poor harvest hit the international sultana market. Bad news also for Guiness lovers, with a shortage ahead of Xmas due to ‘unprecedented demand’ caused by a drinking challenge amongst younger drinkers trending on social media!

Finally, as it is the last Alpha Bites of 2024, thank you for your continued support during the year, and may we wish all our readers a very Merry Christmas and a prosperous 2025 – albeit for many of us, much will depend on what Donald Trump, Vladimir Putin, Xi Jinping, Benjamin Netanyahu, Sir Keir Starmer and Rachel Reeves decides to do next year, but at least that’s tomorrow’s problem!

 

Read Last Week’s Alpha Bites – The sick man of Europe?

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