This Chicken Tastes so Clucking Good

This past Wednesday, Tyson Foods announced their intent to withdraw the usage of antibiotics in their chicken products by August 2017. Those products can sell for 20% more than conventional versions, though they tend to cost more to make. Instead of using antibiotics, Tyson intends to give its animals probiotics which help with improving general immune system health. Tyson Foods came to this conclusion after growing consumer disgust at the concept of medicated feed being fed to animals that they eat-something that their competitors Pilgrim’s Pride Corp. and Perdue Farms Inc. have been working on for years. They also faced indirect pressure from Yum! Brands. Tyson Foods supplies all Yum! Brands chains that use chicken, including KFC and Taco Bell, as well as McDonald’s, Burger King, Wendy’s, Wal-Mart, Kroger, IGA, Beef O’Brady’s, small restaurant businesses, and prisons. Investors immediately panicked upon the announcement and Tyson’s stock plummeted from $63.86 to $62.86.
Thomas Hayes, Tyson CEO, in an interview outlined a range of new sustainability efforts alongside new products that aim to drive the company’s brands, including Hillshire Farm, Jimmy Dean sausages and Ballpark hot dogs, further into grocery store aisles, where consumers have been shown to pay more for brands that are environment- and animal-friendly. Chickens that do end up getting sick will be fed antibiotics and sent off to be butchered under a different label.

WSJ

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Oil Agreement Indications

As the supply agreement for oil-producing countries has taken effect, oil finally reached a price level seen in July of 2015. These highs are due to a cooperative agreement between both OPEC and numerous non-OPEC producers. Notably, from the non-OPEC side, Russia and Mexico have cut production by 300,000 and 100,000 barrels per day, respectively.

This marks the first coalition of its kind since 2001, and international oil companies have already seen the boost to come from the effect. The real question now that is on the mind of traders and speculators concerns the implementation of the supply cuts. At the end of the day, the market is pricing in a fully-efficient and successful cut made by all participating countries. But the real price swings that will occur have to do with how accurately the countries will move forward with the cuts, and whether it will be to the same extent as projected.

Pundits are considering the economic position of these oil-producing countries as the number one deterrent against any numbers not meeting expectations. However, the actual results will remain to be seen as we see the first supply numbers come out next month.

FT

 

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Interest Rate Hike Raises Questions

As 2016 draws to a close, there is still discussion surrounding the long-awaited rate hike that is supposed to take place this week during the Fed meeting. While it is almost guaranteed that the 25-basis point increase will go through, the real questions are regarding the words that will be used to initiate this hike.

With the S&P 500 reaching highs, and the jobs reports signaling solid growth there is no reason Yellen should be concerned with moving forward. But many are asking whether there will be discussion surrounding the surprise election of Donald Trump. Clearly, there were moments of instability surrounding November, and there are still waves of populism affecting the European Union; it has been a rocky year for most of us.

But the Fed made their mission straightforward-there will be no political involvement in the decisions that the central bank makes. The bigger question, then, is what happens when there is such  a huge parallel between what happens in the political arena and the economy. The likeliness of a hike are 97%, but the disagreement is to why exactly. Results will be give at the meeting on 2:30PM on Wednesday, December 14.

Artem R.

Reuters

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Electric Trucking Charges Up

In the midst of the global shift towards sustainable alternatives, a public-road test for autonomous electric trucks is going to take place in Colorado. Coils will be present in these electric trucks, which will draw power from the coils installed in the roads. For a long time, self-driving trucks have been rare because they would need to make stops every now and then to recharge and the batteries that the trucks would have attached onto them are very expensive and heavy. Uber and Anheuser-Busch InBev SA already developed an autonomous trucking unit for a beer delivery, making it the first shipment by an autonomous truck. Though very expensive to even retrofit the roads, construction for the project will take place in late 2017 and hopefully begin testing in 2018. It will be very interesting to follow the project and see the impact this shift to electric power will have on air quality and the labor force.

WSJ

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China Eases Back Into Selling Shares

It has been one year since the stock market crash and China is looking to stimulate and turn around its slow economy; deleveraging is one of the ways China plans to do so. So far, about 61 companies received the approval to be listed on the Chinese stock markets in the first six months, and 172 companies have been approved just in the second half of the year. Total equity raised has already reached 1.54 trillion Yuan, which compares with 1.04 trillion in the same period last year. There are two main reasons to the boost in equity raising activity lately. Although the benchmark indices are still down about 9%, they have been up 21% since last January, indicating a bull market. Second, China is planning on decreasing the corporate debt levels, reducing the stress levels of China’s banks and bond markets.

We’ve seen a lot of steps taken already, such as the Chinese central bank cutting the supply of short-term loans in September, a program allowing companies to swap bank debt for equity. This momentum of equity raising should continue on for at least another year.

WSJ

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Glencore and Qatar Take 19.5% Stake in Rosneft

Glencore and Qatar Investment Authority signed a deal on Saturday to purchase €10.2bn of shares in Russian state oil company Rosneft. The deal is the largest foreign direct investment into Russia since the US and EU imposed sanctions on the country in 2014.

Qatar will invest €2.5bn and Glencore will invest €300m for equal stakes in a special purpose entity that is buying a 19.5% stake in Rosneft from its government-owned parent company Rosneftegaz. In addition to the €300m it would invest in the vehicle, Glencore will provide a further €1.4bn in “margin guarantees”. The guarantees are designed to offer protection to the consortium of lenders against a large fall in the value of the Rosneft shares.

The sale of Rosneft shares is an attempt to raise extra cash for Russia’s budget amid low oil prices, and a battered economy. The stake was sold at a 5% discount to it’s market value. The deal signing came as Russia and other oil producers thrashed out an agreement with OPEC, the oil producers’ cartel, to cut output.

 

Uzair

Financial Times

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Boeing Seals Iran Airline Deal

Boeing secured a deal this week to sell 80 jetliners to Iran. The agreement is one of the first major deals between a U.S company and Iran after sanctions on the country were lifted earlier this year. The deal comes amid a political flux, as President-elect Donald Trump has criticized the Iran Nuclear Accord and threatened to back out of it once he’s in the White House.

European rival Airbus Group SE also clinched an aircraft deal with Iran carrier Iran Air this past month. The $16.6 billion deal between Boeing and Iran was first announced in June but officially sealed on Sunday. It will serve to renovate the country’s aviation fleet according to Iran’s transport minister, Abbas Akhoundi.

Because the sale involves a state-owned entity, it must first be approved the U.S. Treasury, State Department and Congress. This presents a potential obstacle, given the company’s strained relationship with Mr. Trump. Last week, Trump criticized Boeing about the high cost of the company’s Air Force One deal.

Despite new wariness after the election of Mr. Trump, many big and small Western companies continue to move ahead with early plans to enter Iran. Still, many others have held back on big commitments.

 

 

Uzair

Wall Street Journal

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