Ever since the financial crisis sparked an avalanche of inflation worries, the commodities market has taken off. It’s a lesser known part of the investing universe and was traditionally thought of a little bit like the Wild West, but, more and more, mutual funds and regular old investors are trying their hand in the commodities market. But what is a commodity?
If anyone knows a commodity when he sees one, it’s Layne Carlson, Chief Regulatory Officer at the Minneapolis Grain Exchange. "Anything where something can be contracted for future delivery. In essence, you could have basketballs, you could have pencils as a type of commodity," says Carlson.
Okay, people don’t actually trade basketball and pencil futures, yet. What they do trade are raw materials like lumber, cotton and oil.
To qualify as a tradable commodity, an item has to be pretty uniform. "Corn is a classic example of a commodity," says Dan Manternach, Ag Services Director at Doane Advisory Services in St. Louis, "A cereal manufaturer who makes cornflakes will buy anybody's corn, as long as it meets certain quality standards. It's grade #2 corn." Manternach says a true commodity has the same value no matter where it’s from or who produced it.
Also, a steady supply of that product has to be critical to a lot of companies.
Jeff Crist owns a 600 acre apple orchard in New York’s Hudson Valley. We’re standing beside the flume in his packing plant, where thousands of Fuji apples are bobbing along in a moving water bath. In the packing facility, apples get washed, dried, waxed, and polished with giant round brushes before getting boxed up and shipped all over the country.
Around 20 percent of Crist’s apples are turned into juice. Apple juice is the newest commodity getting on the Minneapolis Grain Exchange. Layne Carlson says a few years ago, beverage companies got together and asked for it. "The juice products association said, 'We have a commodity that has a lot of price volatility and we're looking for a means to set off that price risk,'" he says.
Beverage companies had started using a lot of apple juice: Chinese consumers have developed a taste for it, so demand has soared, and apple juice is increasingly used to sweeten other juices and food products. Beverage companies had been purchasing it old school--through deals with farmers, but as demand for apple juice increased, more companies realized they needed to turn apple juice into a commodity.
Turns out it was just in time. In 2012, the northeastern apple crop was hammered by a spring freeze "which froze off in some orchards, almost all the viable buds," says Crist. He's standing near a row of Empire apple trees. It’s a frosty autumn day and freshly harvested trees stretch out in every direction. Last year, Crist lost almost all of the fruit on these trees: honey crisps, red delicious, Romes. All told, the freeze destroyed half his crop.
"The crop was the poorest crop of apples grown east of the Mississippi in the last 50 to 100 years," says Crist. "Juice prices, at least in my lifetime, reached an all-time high, due to the shortage."
But, because apple juice was a commodity, companies were able to protect themselves.
When a commodity is traded on an exchange, companies can buy futures contracts, meaning they can buy the apple juice they need months or even years in advance.
They risk paying more than they’d have to if prices fall, but if there’s a freeze and prices jump, they’re locked in.
Farmers like Jeff Crist can use the futures market too and sell their apple juice at a certain price to beverage companies before the apples are even picked.
But farmers and producers aren’t the only ones who like commodities. "It used to be that corn was only worth as much as it was worth to feed to cattle or to make cornflakes, but now corn has a new component of value: Its value as a store of wealth," says commodities Analyst Dan Manternach.
Investors are now using commodities as a way to protect against inflation, because the value of copper, wheat and cotton doesn’t depend on how much the US dollar is worth.
Since the financial crash, Manternach says, the number of regular investors putting money into commodities has sky-rocketed and it’s made his job a lot more complicated. "And you go, 'My goodness, what’s changed from yesterday? Why did the price of wheat go up 25 cents a bushel when there is no news?' And then you find out, 'Oh, it’s because the price of gold and crude oil went up sharply, which raised the fear of inflation.'"
Farmer Jeff Crist isn’t too worried about losing money this year. After the disastrous crop of 2012, this year’s is one of the best he’s ever seen.
Afghan and U.S. officials have agreed on a draft security pact, but Afghan elders are debating whether to approve it. President Obama has told Afghan President Hamid Karzai that the U.S. would conduct raids on homes only under "extraordinary circumstances."
Regularly Marketplace Tech listeners know we love talking about new materials that are being discovered and experimented with, and how those materials might help us take big leaps forward when it comes to new technology.
Today, we look closely at one of those incredible materials, this one beloved by science geeks all over -- graphene. Graphene is a crystalline form of carbon. If that explanation is a little bit too high school science text book for you, let Marketplace reporter and resident graphene fanatic Sabri Ben-Achour take over. Sabri is so infatuated by graphene he literally sings songs about it (click the audio player above to hear). He describes graphene this way:
"Picture a honeycomb, then slice it down so thin that it cannot be sliced any thinner -- the thinnest slice of honeycomb imaginable -- one atom think. And, then, instead of making it out of honey, or beeswax -- carbon. So you know how a diamond is carbon stacked in the most perfect way? This is the flat version of that."
Okay, Sabri. So we've got a one atom-thick honeycomb. But we're still failing to see what's so great about it.
"I also forgot to mention that the other thing about it is that it's basically magic," Sabri says. "It's super flexible and stretchy. It conducts heat and electricity thousands of times better than copper. But it's stronger than a diamond, so according to one researcher, it would take an elephant balanced on a pencil to break through a sheet of graphene the thickness of Saran wrap."
An elephant on a pencil?! What an image! Got it. It's super strong. But what can it do?
"It has all kinds of weird properties, like water can pass through it, but helium can't -- and helium is smaller than water. They want to use it in solar panels, because it might be more effective at catching light. And, I also love the way they discovered it, which was, they just like put tape on graphite -- on like pencil lead -- and pulled up the tape, and they were like, 'Oh, my god, it's graphene!'"
Now we’re interested. So we decided to head up to MIT to visit an assistant engineering professor there named Dirk Englund at his lab. There at his Quantum Photonics Laboratory, researchers are studying how we can change the way computer chips move information around by shooting light particles through a bunch of layers of silicon and graphene that are glowing under a microscope. Still confused about how this tiny silicon-graphene sandwich was going to revolutionize computing? Professor Englund cleared all of that right up.
"The device that we created here is a photo-detector that could used for very high speed optical communications," Englund said. "What's unique about graphene is, why there's so much excitement, I think, is that this process is very, very fast. Electrons in graphene travel almost unimpeded, with almost the speed of light. So you can potentially send more data faster, and make better use of your optical channels on a chip."
We get that it's fast. But it's a lot easier to imagine something like a super fast iPhone than electrons traveling at the speed of light. How will these graphene developments impact us as consumers?
"It used to be that telephone lines were wires, metal wires,” Englund says. “And now, they're optical fibers. Now, if you go to fast computer centers, data centers, high performance computers, they actually use optical fiber, instead of copper. At some point, it's going to go to the level of the chip, where one chip talks to other chips or other computers or other users via light signals. There's a very strong need for that computer to turn electrical signals into optical signals very efficiently. The technology that will drive these optical communications is still under development -- these devices could potentially be much more compact than detectors that are used today. And that means smaller chips, and maybe more complex chips."
As wonky as it may seem, we're moving into a world where information is delivered by light instead of electricity. And graphene could really change the landscape of computing by helping that information travel faster, and more efficiently, than ever before. Guess graphene is pretty cool after all.
NPR photographer David Gilkey has photographed in extreme situations — from the surge in Afghanistan, to bombings in Gaza, to the tsunami in Japan, but nothing could have prepared him for what he saw in the village of Barangay 68 in Tacloban City, Philippines.
The big news from the car shows in Tokyo and Los Angeles is that hydrogen-powered cars will be coming to the market in the coming months. The three largest Asian car manufacturers, Hyundai, Honda, and Toyota will all be introducing hydrogen powered cars soon. Toyota's model will resemble its popular Prius hybrid, but will contain a hydrogen-powered engine.
Unlike electric and hybrid electric cars, hydrogen vehicles can be refueled in about the same amount of time it takes to fill up a traditional car. But unlike those cars that run on fossil fuels, water vapor -- not pollution -- comes out the exhaust pipe in the back of the car.
That doesn't mean hydrogen cars are necessarily better for the environment. While hydrogen could be derived from greener sources in the future, right now it's mostly derived from cracking the hydrocarbons found in natural gas.
It’s been a week since President Obama announced that people with canceled health insurance policies should be able to keep them for another year. That’s if states and insurance companies agreed. Well, so far 13 states have agreed, eight have said no, and a very big one could decide today.
California is big in a couple ways. Last month, more people enrolled in its exchange than enrolled in all of healthcare.gov. At the same time, close to a million Californians have seen their policies canceled. In Los Angeles, graphic designer Colleen Corcoran is one of them.
“I mean I do have mixed feelings about the fact that this inexpensive plan that I’ve had is being canceled,” she says. “And it’s not easy for me to have to pay more.”
But she also had zero preventative care. Her deductible was so high, if she got sick, she just toughed it out. Corcoran says it’s probably time to pay more and get more.
Meanwhile California Insurance Commissioner Dave Jones wants people to be able to renew their policies. He says the move would not undermine the exchange. He says as insurers have canceled policies, they’ve been suggesting people sign up for non-exchange plans.
“It’s completely disingenuous then for those same health insurers to say ‘We’re worried about the exchange’ when in fact they’re steering people to non-exchange products,” he says.
The board of Covered California, which put the state marketplace together, will meet today to discuss whether allowing renewals would indeed undermine the new marketplace’s risk pool.