Palm Oil. A sustainable solution is in hand

Palm oil use is controversial – production is damaging to the environment and it is high in saturated fat, causing concerns about our health. It is used in everything from chocolate to pizza, shampoo, and deodorant to toothpaste. It is believed to be present in 50% of all supermarket items, across every category. It is odourless, tasteless and colourless, being used as a natural preservative and as it maintains its properties at high temperatures, it is ideal for cooking within hotter climates.  Palm oil remains the world’s most-produced vegetable oil, accounting for 40% of the total according to the World-Wide Fund for Nature (WWF).

While consumer goods companies have increasingly turned to sustainable sources of palm oil, there is still no getting away from the impact that palm oil has had on the planet in the past. Palm oil production is said to have been responsible for about 8% of the world’s deforestation between 1990 and 2008. Palm oil plantations have destroyed the natural habitat of many species, such as orangutans and have resulted in less biodiversity.

The good news is that scientists at Queen Margaret University in Edinburgh believe they have come up with the ‘holy grail to replace palm oil.’ The new PALM-ALT product is made from a by-product from the linseed industry, plus natural fibre and rapeseed oil. The scientific team believe the 100% plant-based PALM-ALT is 70% better for the environment. Furthermore, with 80% less saturated fat and 30% fewer calories it is also a significantly healthier option. Discussions are about to start with potential manufacturers to focus initially on its use in bakery products such as bread, cakes, and biscuits.

While this news is not enough to make orangutans sleep more soundly at night, it may be a significant first step in starting to wean the world off palm oil.

What have we been watching?  

The sell-off in European and US fixed interest markets continued last week which in turn fed through into risk assets particularly economically  sensitive global commodities such as copper and oil. Markets do appear to be increasingly buying into central banks’ message that they plan to keep interest rates ‘higher for longer.’  One member of the US Federal Reserve said ‘it was appropriate to raise rates further and hold them at a restrictive level for some time’ while another said ‘we will need to hold rates at a sufficiently restrictive level to achieve our goals.’ A ‘blow-out’ US jobs report on Friday saw the 30-year US Treasury yield briefly rising to 5.05% before edging back to 4.95% -a level not seen since the financial crisis of 2007-2009. The market mood might not have been helped either by the developments in US politics.

However, the rise in bond yields has been particularly pronounced for those bonds with longer maturities, where cyclical economic factors tend to play less of a role. Bond yield curves are less inverted than they have been in recent months. Yield curve inversion is perceived as a fairly reliable  lead indicator of recession as shorter dated yields are kept in more restrictive territory than the longer-term trend. The recession argument is less compelling with bond yields rising at the longer end of the curve. Nor do rising yields appear to reflect mounting inflation concerns as the rise has been in real, not nominal yields.  So, what is going on? Does the movement perhaps reflect mounting concerns about the political feasibility of restoring fiscal stability? One thing is certain, and that is policy makers and markets will be watching inflation data and PMI business activity indicators even more closely. The US inflation data later this week including both the consumer prices and producer price indices will be extremely important for markets.

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An historic vote in the US unseated speaker Kevin McCarthy and has left the lower chamber of Congress in limbo with no clear resolution to the crisis. The House of Representatives has gone into recess until at least later this week as a handful of Republicans are openly or privately vying for the top job. There could be global consequences from this development from a potential government shutdown from 17^th November to military support for Ukraine.  

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Putin looks to be preparing for a prolonged war of attrition in Ukraine as Russia’s defence spending is set to rise to $108bn in 2024 which is three times the amount allocated pre-invasion and 70% more than in 2023. The Russian military budget is reported to be greater than social welfare spending for the first time.

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The secretary general of OPEC+ saying demand for oil will continue to grow and remain resilient this year. Brent oil dropped $86 as markets focused on ‘higher for longer’ interest rates. However, the price has ticked up above $87 following the terrible events in Israel with Hamas saying it had support from Iran.

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Finally, the price of a first-class stamp has risen from £1.10 to £1.25, the third increase in 18 months and with a rise of almost 14% one that is well ahead of inflation! At least the price of a second-class stamp remains unchanged at 75p. Royal Mail blames increasing cost pressures and the economy. In addition, it says that in recent years the volume of letters posted has fallen from 20 billion to 7 billion while the number of addresses has risen by 4 million.

Read Last Week’s Alpha Bites – Rules of Origin

 

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Alpha Portfolio Management is a trading name of R C Brown Investment Management PLC which is authorised and regulated by the Financial Conduct Authority.