Banananomics: Markets Gone Wild

As Tesla's shares fell 33% on the year, demand for electric vehicles has stalled.

Inputs that matter: According to Bloomberg, Tesla has reclaimed its title as the world's top seller of electric vehicles, snatching the lead back from China's BYD.

• During 2023, electric vehicle sales passed the 5% tipping point in 31 countries.

• In 2022, only 19 countries had EV sales more significant than 5%.

• Bloomberg reports, "The trajectory laid out by countries that came before them shows how EVs can surge from 5% to 25% of new cars in under four years."

The opportunity: Thailand emerged as Southeast Asia's EV pioneer, surpassing the 5% threshold in the first quarter of 2023 and rising to nearly 13% of new car sales by the last quarter.

• Norway, with 79.6%, Iceland, 58.4%, and Denmark, 44.9%, are the leading EV countries.

• China is at 23.8% EV adoption, and the U.S. comes in at 8.1%, which is the core market for Tesla.

Zoom in: Sales of electric vehicles are partially based on environmental concerns, but demand generation is far more complex.

• Madalina Vlasceanu and colleagues surveyed 59,000 people across 63 countries about their views on climate change, reporting the results in Science Advances.

• 86% of respondents believe climate change is a severe threat, and humans are the cause.

Between the lines: While many people are concerned with climate change, their response to appropriate action centers around government policy and not individual responsibility.

• The main driver for EV growth is battery technology, which provides a more extended range between charges.

• Next is the cost that can be circumvented with tax credits.

Follow the money: The Verge explains, "Tesla is closing in on a new manufacturing process that could significantly reduce costs and increase production of its electric vehicles."

• Tesla's new technology and Chinese rivals such as Xiaomi are driving down the cost of EVs.

• According to the Wall Street Journal, Tesla has been awarded more sites than any other company to help build the nationwide fast charging network.

• Ford, BMW, Genesis, General Motors, Honda, Hyundai, Jaguar, Kia, Lucid, Mini, Mercedes-Benz, Nissan, Polestar, Rivian, Toyota, and Volvo can also use the Tesla charging system.

Since March, U.S. crude futures went from $81 to $85 a barrel as OPEC+ cuts supply.

Inputs that matter: Research from ICICI Bank sees $90/bbl to $95/bbl as a possibility for 2024.

• Barchart reports that conflicts in the Middle East with production curbs by the Organization of Petroleum Exporting Countries are pushing prices higher.

The opportunity: When oil moves upward, the price of sugar usually follows shortly after that.

• "Strength in crude prices benefits ethanol prices and may prompt global sugar mills to divert more cane crushing toward ethanol production than sugar, thus curbing sugar supplies."

Zoom in: With oil prices rising, market analyst John Kemp reports that traders have been buying oil at the fastest rate since 2020.

• According to Bloomberg, "Nearby oil futures are trading at large premiums to those later for a later date, indicating strong demand for barrels for immediate delivery."

Between the lines: Dry weather in India and a weakened currency in Brazil keep sugar from gaining momentum.

• The Brazilian real has fallen to a five-month low against the USD due to limited gains in sugar.

• The weaker real encourages export selling from Brazil's sugar producers.

• The Indian Sugar Mills Association (ISMA) reports a -0.7% decrease in sugar output due to the poorest monsoon rainfall in 5 years.

Follow the money: "The likelihood that continued restricted Russian product exports could further tighten U.S. petroleum supplies has suddenly forced re-calculation of U.S. (oil) balances across the rest of this month and possibly beyond," Jim Ritterbusch from energy consultancy Ritterbusch and Associates, told Reuters.

• The Energy Information Administration (EIA) reported an inventory build of 3.2 million barrels for the last week of March. While identical to last week's report, the news caused oil to continue its climb.

• The weakened sugar market does not provide enough Ethanol competition to reduce oil demand.

Cocoa prices are soaring as Ghana's Cocoa Board (Cocobod) expects the 2024 harvest to be half of their initial forecast.

Inputs that matter: Ghana, part of the Ivory Coast, is the largest producer of cocoa in the world.

• Cocoa prices have more than doubled (+143%) since the beginning of the year.

• North American cocoa grindings fell -3.0%.

• The Cocoa Association of Asia reported that grindings fell -8.5%.

• The European Cocoa Association reported that European grindings fell -2.5%.

The opportunity: Cocoa prices have more than tripled over the last year as disease and adverse weather pushed the global market to a third successive deficit.

• "There were several proposals on the table and as a last resort the president wanted the highest possible price for the producers so he decided 1,500 CFA per kg instead of 1,200 CFA, which had been validated previously," the director of a European export company told Reuters.

Zoom in: Blue Line Futures Chief Market Strategist Phillip Streible explains that cocoa price increases are "a combination of things that won't get resolved anytime soon."

• According to Bloomberg, the disappointing harvests from the Ivory Coast have attracted new investment to ramp up cocoa production in Brazil, the previous world leader. 

Between the lines: Inflation in Ghana has skyrocketed since 2022, as the Ghana cedi fell to 35.7% against the U.S. dollar (USD).

• Ghana stands 9th among 26 other countries in terms of adopting cryptocurrency.

• Cryptocurrencies are the alternative financial system for countries that are not part of the BRICS or G7 banking systems.

• Ghana's upstart competitor, Brazil, is a member of BRICS with full access to the organization's banking system.

Follow the money: The International Cocoa Organization (ICCO) is an intergovernmental organization comprising cocoa-producing and cocoa-consuming countries.

• The London-based ICCO was created in 1973 after the first United Nations International Cocoa Conference, which created an international agreement for the commodity trade.

• The current agreement has been in effect since 2012.

• As Brazil increases production with the support of other BRICS nations, a new ICCO agreement may be reached soon.