Hi, The Investor’s Podcast Network Community!

Wanted: Pest-control help 🧤

Employment for extermination and pest-control services has risen more than 18% in less than four years, roughly 6x the growth of the economy.

Fueling the trend: Warmer average temperatures and migration toward states like Florida and Texas.

💭 There are now more than 150,000 exterminators nationwide, and many mom-and-pop companies are profitable industrywide.

— Matthew, Weronika & Shawn

Here’s the rundown:

Today, we’ll discuss the three biggest stories in markets:

• The future of the $200 billion coffee market
• The first-ever debt-for-nature conservation swap in Africa
• America’s struggle with homelessness

All this, and more, in just 5 minutes to read.

IN THE NEWS

☕ Have We Reached Peak Coffee? (FT)

Roughly 3 billion cups of coffee are drunk each day. Consumption has almost doubled over the past 30 years. At that rate, 6 billion cups of coffee could be consumed daily by 2050.

But scientists warn the coffee market may be at risk as global temperatures rise. Up to half of the current coffee farmland could be unusable as coffee consumption surges in places such as China, India, Indonesia, Malaysia, Vietnam, and sub-Saharan Africa.

• Starbucks will open a coffee shop in China every nine hours to hit 9,000 locations nationwide by 2025. Consequently, the world will need about 25% more coffee by 2030.

One question: Can the coffee industry sustain rapid growth with its current supply chain?

A changing climate is making suitable land for cultivating coffee a real challenge. Farmers are struggling in certain regions, and prices for consumers are rising.

• Humans have discovered about 130 species of coffee, but we rely on just two for almost all consumption — Coffea arabica and Coffea canephora.
• Said a leading coffee researcher: “In an era of accelerated climate change, we really have to think differently — think outside the box — and we may not get the coffee that we want. Longer term, I think we’ll be paying more for coffee.”

Why it matters:

Part of the issue: Coffee is sensitive to changes in weather, particularly temperature and rain, with a narrow zone it can thrive in that’s increasingly hard to find.

• Yet, Coffee is a highly-traded commodity at the center of multiple economies and millions of people. It’s a roughly $200 billion industry.

Difficult work: Across 50 “coffee belt” countries, about 80% of the 25 million coffee farmers are small producers working on tiny plots of land.

• Much of the work is done by women, already struggling on low incomes, who now face more droughts, floods, pests, and increased disease, pushing some to leave the industry altogether.
• The world’s coffee supply is largely grown in Brazil, Vietnam, Colombia, and Indonesia. Those areas face warmer temperatures, which could limit the size of suitable coffee-growing areas in the coming decades.

But millions of dollars are pouring into farming technology and climate-resistant plants. “As a scientist, I’m an eternal optimist,” one said. “I think we can innovate our way out of this mess.”

🌱 First-Ever Debt-For-Nature Swap in Africa (FT)

Nature conservation and finance don’t have to be at odds. In fact, they can complement each other, and the African country of Gabon is showing the world how.

ROI for planet Earth: In a $500 million deal arranged by Bank of America, the country will pay a lower interest rate on its debt and have longer to make repayments.

• In exchange, it’ll spend at least $125 million to widen a marine reserve and strengthen fishing regulations (namely to protect endangered humpback dolphins.)

Setting a precedent: For developing countries, the deal illustrates how to address two pervasive challenges: High borrowing costs — it’s more expensive for many emerging market countries to raise funds — and mitigating the impacts of industrialization on local ecosystems.

• Gabon achieved both, freeing up money that would’ve gone towards interest payments to support wildlife conservation instead.
• Jeff Ubben, part of the advisory team for the UN climate summit COP28, said, “It’s the hardest thing to do in the world to put money into [protecting] nature,” but “you get enough use cases and…then it really takes off.”

Gabon’s environmental minister Leo White calls the bonds issued “blue bonds,” reflecting their ocean conservation theme.

Why it matters:

These blue bonds have proven a much more efficient way to raise nature conservation funds compared with Gabon’s previous efforts to sell carbon credits from projects that reduce or remove carbon emissions.

• And as a result of the deal, Gabon’s blue bonds will carry a 6% interest rate, lower than the 10-11% yields its other bonds trade at.

More to come? African countries, like Kenya — which has $2 billion of debt coming due for refinancing next year — are looking to do similar deals to help ease their debt pains.

• Scott Nathan, head of the International Development Finance Corporation, added the bank was working on parallel deals for countries with “debt management goals…and conservation issues.”

Still, the $500 million loan represents just 4% of Gabon’s total debt pile, and Moody’s says the country still faces “high credit risks” from the green transition since over one-third of its government revenue is tied to the oil industry.

🏚️ Why Are More Americans Ending Up Homeless? (WSJ)

You might have seen alarming videos of Venice Beach, the iconic boardwalk in Los Angeles, resembling a dumping ground with scattered grocery carts, tarps, and blankets.

These unsettling visuals have become more frequent nationwide.

A disturbing trend: A Wall Street Journal analysis of U.S. data reveals that homelessness has surged to record levels this year, including a dramatic increase in chronically homeless individuals who have disability conditions.

• The figures for this year have surged by about 11% compared to 2022.
• This increase is the largest ever recorded since the government began tracking comparable data in 2007. The closest spike was a 2.7% rise in 2019, discounting a pandemic-related anomaly in the count last year.

While point-in-time counts are generally regarded as an incomplete representation of the actual issue, these figures are crucial to the U.S. Department of Housing and Urban Development (HUD) for assessing the homeless population and distributing resources.

Other areas affected: Denver registered a 32% rise in homelessness figures during this year’s point-in-time count, marking one of the highest increases among major cities.

• New Orleans experienced a nearly 15% uptick in its homeless count that reversed recent progress, and Los Angeles County reported a nearly 10% annual increase.

Why it matters:

The Total Number of People Experiencing Homelessness per Year by Type in 2022

The factors at play: This year’s increase signifies an accumulation of challenges across the U.S., including escalating housing expenses, a scarcity of affordable rental units, and the opioid crisis. Persistent inflation across the economy, from groceries to clothing, hasn’t helped.

• This collective impact intensifies as pandemic-related relief measures and policies like eviction moratoriums wind down. For countless families, it was a crucial support and the final federal safeguard that ensured stability and secure housing throughout the pandemic.
• HUD’s data shows that while most people facing homelessness are individual adults, there are families and thousands of homeless veterans and unaccompanied youth as well.

Attempts to address the issue: The figures are especially concerning before next year’s presidential election. Recent Biden administration actions include allocating over $500 million for housing vouchers, emergency rental assistance, and grants to address rural and unsheltered homelessness.

Homelessness disproportionately affects communities of color: While 11 out of 10,000 white individuals face homelessness, this number rises to 48 for Black individuals and 121 for Native Hawaiian or Pacific Islanders.

See you next time!

That’s it for today on We Study Markets!

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