Three things that got the team talking this week - Firetrail Investments

Weekly insights from the Trail

Three things that got the team talking this week

April 14, 2022April 22nd, 2022

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1. Food fight…

World food prices jumped nearly 13% in March. The Food and Agriculture Organization’s (FAO) food price index hit a new record last month, following what was a record print in February. And is now up more than 50% since mid-2020. The war in Ukraine has caused turmoil in markets for staple grains and edible oils. Russia and Ukraine are major exporters of wheat, corn, barley, and sunflower oil. Meanwhile the Biden administration announced temporary plans to allow higher ethanol blends in gasoline to help lower consumers fuel costs. The use of gasoline with 15% ethanol, dubbed ‘E15’, is set to raise demand further for corn and other ‘biomass’ products.

The looming food fight bodes well for the agriculture exposed stocks across the Firetrail funds – including Archer Daniels Midlands in the S3 Global Opportunities Fund, and Nufarm and Incitec Pivot in the Australian funds.

UN Food and Agriculture World Food Price Index – Price change (1 month %)

Source: Bloomberg

2. All in the price…

Electric vehicles (EVs) have not escaped the impact of the volatile commodity moves of late. The price differential between internal combustion engines (ICE) and EV raw materials has gone from USD ~$2,000 to now USD ~$6,000, as shown in the chart below. This means Battery EV’s are about to get $4,000 more expensive holding all else equal. The price move makes sense given lithium is in short supply and the market is trying to slow down demand. We wait to see if this impacts EV penetration rates over the coming months.

3. Time to Fly…

Delta Airlines reported a March quarter beat this week. Their CEO commented that “for the last month we have seen the highest sales and booking activity on Delta than any time in our history,” despite offering only 90% of its pre-pandemic seats for sale. And we’ve all heard about the chaos happening at Sydney airport right now due to staff shortages and ‘rusty’ passengers! Spending rose again through March in Australia, and we are keeping an eye on the rising overseas travel spend…

Source: ABS, CBA, Google, RBA, Macquarie

Disclaimer

This article is prepared by Firetrail Investments Pty Limited (‘Firetrail’) (ABN 98 622 377 913, AFSL 516821) as the investment manager of the Firetrail Australian High Conviction Fund (ARSN 624 136 045), the Firetrail Absolute Return Fund (ARSN 624 135 879), the Firetrail Australian Small Companies Fund (ARSN 638 792 113) and the Firetrail S3 Global Opportunities Fund (ARSN 653 717 625) (‘the Funds’). Pinnacle Fund Services Limited ('PFSL') (ABN 29 082 494 362, AFSL 238371) is the product issuer of the Fund. PFSL is not licensed to provide financial product advice. PFSL is a wholly-owned subsidiary of the Pinnacle Investment Management Group Limited (‘Pinnacle’) (ABN 22 100 325 184). The Product Disclosure Statement (‘PDS’) and Target Market Determination (‘TMD’) of the relevant Fund are available via the links below. Any potential investor should consider the PDS and TMD before deciding whether to acquire, or continue to hold units in, the Fund.

Links to the Product Disclosure Statement: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

Links to the Target Market Determination: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

For historic TMD’s please contact Pinnacle client service Phone 1300 010 311 or Email service@pinnacleinvestment.com

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