BBH Commodity Markets Update

CMU Cover Image

The BBH Commodities & Logistics team provides advice and capital in the areas of commodities, logistics, transportation and infrastructure. They recently released their latest edition of the BBH Commodity Markets Update, a publication focused on current events and market conditions within the physical commodity markets.

In the current commodity market environment, secular change abounds. At times the change is sudden, driven by regulation – for instance, banks exiting physical commodity trading at the impetus of Dodd-Frank legislation.  Other times we see a more subtle, gradual shift – one driven by increasing consumer emphasis on social responsibility, for example. We see the change manifested in multiple forms: from shifting shipping patterns to new ways of measuring risk to changing coffee palates that can focus as much on a story of the coffee beans and those who produce them as they do on the taste.

In this issue, the CMU touches on a variety of topics related to shifts across commodity markets, ranging from technological advancements to changing shipping patterns to a transformation occurring in coffee consumption.

Redrawing Global Shipping Routes: The Panama Canal Gets an Upgrade

The Panama Canal of today is a flurry of activity, with excavators busy constructing a deeper, wider third set of locks that will effectively create a new traffic lane. In total, cargo capacity will double as the canal seeks to maintain relevancy on the global stage and provide an answer to its chief competitors – U.S. intermodal (cross-continent transportation via railroad and truck) and the Suez Canal. In our December 2015 feature article, we discuss the expansion of the Panama Canal, zeroing in on its impact on trade flows around the world.

The Continued Rise of Premium Coffee in the U.S.: Will It De-Commoditize Coffee?

U.S. consumers have developed a more discerning palate when it comes to higher value, specialty foods, and in keeping with this trend, upscale coffee has proliferated. As demand rises and a sense of what constitutes “specialty” begins to crystallize, specialty coffee has grown from a niche market into a multibillion dollar industry. But will increased scale and consumption result in diminished use of the futures market? In this article, we examine specialty coffee’s rise to prominence among U.S. consumers and what this means for the coffee futures market.

Commodity Traders and Technology: A New Wave of Capital Investment?

As global banks have exited the physical commodity trading sector due to new regulations, physical commodity traders have largely stepped in to fill the void. But will traders be able to tackle the technology banks often relied on to compete and achieve success? To find out, the CMU sits down with Rashed Haq, Vice President of Business Consulting at Sapient Global Markets, to discuss the use of data and risk analytics by global physical merchants.

Jonesing for a Fix? Delving into the Merchant Marine Act of 1920

It is impossible to comment on the state of the U.S. shipping market without mentioning the Merchant Marine Act of 1920, commonly known as the Jones Act. Originally designed as a protectionist measure to ensure defense and promote the domestic water-based transportation industry, this 95-year-old piece of legislation is under fire from many who consider it the culprit for transportation bottlenecks and market distortions. In this article, we analyze the Jones Act, assessing its impact on the changing landscape in domestic shipping.