(Bloomberg) -- The prices of raw materials used to make almost everything are skyrocketing, and the upward trajectory looks set to continue as the world economy roars back to life.From steel and copper to corn and lumber, commodities started 2021 with a bang, surging to levels not seen for years. The rally threatens to raise the cost of goods from the lunchtime sandwich to gleaming skyscrapers. It’s also lit the fuse on the massive reflation trade that’s gripped markets this year and pushed up inflation expectations. With the U.S. economy pumped up on fiscal stimulus, and Europe’s economy starting to reopen as its vaccination rollout gets into gear, there’s little reason to expect a change in direction.JPMorgan Chase & Co. said this week it sees a continued rally in commodities and that the “reflation and reopening trade will continue.” On top of that, the Federal Reserve and other central banks seem calm about inflation, meaning economies could be left to run hot, which will rev up demand even more.“The most important drivers supporting commodity prices are the global economic recovery and acceleration in the reopening phase,” said Giovanni Staunovo, commodity analyst at UBS Group AG. The bank expects commodities as a whole to rise about 10% in the next year.China, a crucial source of supply and demand for raw materials, is playing a big role, particularly as the government tries to reduce production of key metals like steel and aluminum. It’s also buying up massive amounts of grains. Food prices are also being affected as poor weather in key growing nations like Brazil and France hits harvests.As just about every basic material gets rapidly more expensive, here’s some ways the rally is rippling across the globe to create winners and losers.Going GreenCopper has enjoyed an unstoppable rally for more than a year thanks to pledges by governments to boost renewable energy and electric vehicle use. That’ll make all the various forms of green technology that rely on it a bit more expensive.Bigger power grids is one such case. About 1.9 million tons of copper was used to build electricity networks in 2020, according to BloombergNEF, and the price of the red metal is up more than 90% in the past year. Usage will almost double by 2050, BNEF forecasts, while demand from other low carbon technologies like electric vehicles and solar panels will also balloon.Buyers and SellersFor countries, the impact of the commodity rally depends on whether they’re an exporter or importer. For those relying heavily on exporting raw materials, the huge upswings can only be good news for public finances, especially when they’ve just been stricken by a once-in-a-century pandemic. The likes of Australia (iron ore), Chile (copper) and Indonesia (palm oil) all make huge sums from commodities.Meanwhile, countries looking to rebuild infrastructure may find their budgets buy less than they used to. President Joe Biden’s $2.3 trillion plan is one such case. Electricity grids, railways and refurbishing buildings are among the items on the shopping list that will use large amounts of metal.Consultancy CRU Group estimates the program will add 5 million tons of steel to the 80 million the U.S. uses each year, with similar boosts to aluminum and copper demand.MeatIt’s been a tough year to be in the meat business, from devastating Covid outbreaks to the deadly pig disease that hit Germany and is roaring back in China.And as crop prices surge, farmers rearing poultry, pigs and cattle are among the first to get squeezed by the eye-watering run-up in grains. Costs for corn fed to livestock have doubled in the past year, and soybean meal is more than 40% higher. While there’s a delay before that hits the burger chain or steakhouse, there are already signs of prices creeping higher.Old Steel MillsSteel producers in Europe and America have suffered for years from low prices caused by global overcapacity. Plants struggled to make money and job security became a growing worry. Over 85,000 steel jobs were lost in the European Union between 2008 and 2019, according to industry association Eurofer.That’s all changed dramatically thanks to booming steel prices. Futures in China, by far the biggest producer, have smashed records — even outpacing gains in key ingredient iron ore — as the government took measures to curb output. That’s supercharged rallies of benchmark prices in Europe and America, where mills were already running at maximum capacity as they try to meet unexpectedly high demand.Breakfast TablesWhether you prefer latte or espresso, sweetened or plain, the key ingredients of a cup of coffee have surged. Arabica coffee futures have risen about 33% in the past year, while raw sugar has also advanced. Fancy a slice of toast? Benchmark wheat prices have hit the highest since 2013.Of course, rising commodities don’t immediately show up on grocery shelves and cafe menus. They make up just a part of the costs for retailers, which often absorb the initial increase to keep customers coming back. But there’s a limit to that margin hit, and high prices could ultimately feed through to consumers.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- The days of experts gathering in a sealed-off room to sip coffee and grade beans on their color, aroma and taste may be numbered.Demetria, a Colombian-Israeli company developed an artificial intelligence data platform that can determine the quality of beans when used with hand-held sensors. The machine will need a human to input the quality parameters first, but after that, it will be able to classify coffee before it’s even roasted. The company has completed a pilot program with Carcafe, the Colombian division of Volcafe, one of the world’s largest coffee traders.A shift to computers would upend the traditional way coffee has been graded by humans, known as cupping. The well-paid and trained examiners, or Q graders, at the ICE Futures U.S. exchange in New York conduct the laborious task of determining the quality and value of the coffee beans received by the bourse. Trading houses and roasters also usually have their own graders.Cupping is an involved process, not unlike that undertaken by wine sommeliers. Q graders weigh the coffee and grind it into a cup. They sniff the dry grounds, taking notes on the fragrance. Water heated to 200 degrees Fahrenheit (93 Celsius) is poured over the grounds and the graders smell the wet coffee. After 4 minutes, the crust that forms on top of the cup is broken and grounds and foam are removed. After waiting 15 minutes for the coffee to cool, and only then is the coffee slurped up in a spoon.“It’s the human that establishes the sensorial part,” said Oswaldo Aranha Neto, a coffee industry veteran who just joined Demetria as a board member. “You need to teach the robot what to do.”Demetria last month closed a $3 million seed funding round led by Latin American-Israeli investor Celeritas and a group of private investors including Mercantil Colpatria, the investment branch of Colombia’s Grupo Colpatria.Volcafe, a unit of ED&F Man, is in the process of adopting the technology and rolling it out, seeking “to greatly increase the efficiency and effectiveness of our prospecting process at our purchase points and in the field,” said general manager Sebastian Pinzón.Aranha Neto expects the industry to adopt the system before it filters down the chain to growers, as roasters usually have set quality parameters they are looking for. Demetria’s Chief Executive Officer Felipe Ayerbe added the tool will also help growers generate coffee with the characteristics buyers want, possibly helping fetch better prices.The technology could also help the exchange, which struggled to grade beans during the pandemic due to social-distancing rules. It could also help resolve quality disputes in the market, Aranha Neto said. If adopted by the exchange, traders could also potentially use the device to scan their coffee before they ship it, reducing the risk beans will fail the bourse’s grading.Demetria is also working with the Colombian National Federation for Coffee Growers to develop a series of apps that help farmers control and track bean quality, and price it accordingly, they said.“The ‘wine-ification’ of coffee means that levels of discernment and premiums for the beverage have been increasing exponentially, yet the perception and treatment of coffee farmers differs vastly compared to that of vineyard owners,” said Eduardo Shoval, Demetria’s co-founder and executive chairman.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Adding music to the preparation and tasting of coffee can "undoubtedly affect our mood," a scientist explains.