TheChek News Flow

Europe’s space ambitions at risk over dependence on Nasa, agency warns

The bloc relies on Nasa capabilities for as much of half of its exploration budget

Europe must become less dependent on Nasa’s technology and exploration programmes if it wants to keep its status as a major space power, according to the head of the European Space Agency.

The turmoil over proposed severe cuts in Nasa’s funding is a “wake-up call” for Europe, as about half of the ESA exploration budget could be affected by decisions on Nasa funding, director-general Josef Aschbacher said.

“In some domains, we have been too exposed in terms of dependence . . .[on] Nasa,” Aschbacher told the Financial Times. Nasa would always be an important partner, he added, but “the partnership model that we had in the past may not be working for the future”.

The agency’s member states are discussing the impact on Europe’s exploration and science programmes of White House proposals to cut Nasa’s annual budget by 25 per cent, with a near 50 per cent reduction in spending on science. 

They are debating how to reassess funding and international partnerships to make European space missions more autonomous, when they meet in November to set the ESA’s next three-year budget.

Although 95 per cent of ESA’s total €7.7bn annual budget is independent of decisions made in the US, roughly half of the €600mn allotted for human and robotic exploration this year relies on Nasa’s current spending plans, according to Aschbacher. The ESA is expected to request an even bigger budget for exploration at the November ministerial meeting.

The White House has proposed axing several projects important to European space ambitions, including the Lunar Gateway, a space station destined to orbit the moon, and part of the planned Artemis Moon programme — the vehicle for many of Europe’s lunar ambitions. US participation in the ESA-led Rosalind Franklin Mars rover mission, due to launch in 2028, is also under threat.

Congress is resisting the proposals, with both houses proposing maintaining Nasa’s budget at about $25bn. But there are concerns that the government is withholding some already allocated funding, and that Nasa has begun to close down some programmes.

The agency announced last month that roughly a fifth of its 18,000 employees had quit due to redundancy programmes demanded by the so-called Department of Government Efficiency, created by Elon Musk.

Certain technologies and capabilities, such as those being provided to the Rosalind Franklin mission, were vital to Europe if it intended to maintain its position as a major space faring power, Aschbacher said.

“We can call this a small crisis in particular domains,” the ESA boss said. “We do need those technologies, regardless of whether Nasa’s contribution is coming or not because [they] are needed for any exploration mission in future, whether on the Moon, Mars or somewhere else.”

ESA is also exploring closer ties with countries like India, which aims to land humans on the Moon by 2040.

Aschbacher said the agency was making progress on his goal of boosting private investment in the space sector and that it had signed agreements with 72 investment firms to promote European start-ups and technology.

Last year, some €1.5bn in private investment went into European space companies, according to the European Space Policy Institute, double the roughly €600mn in 2021 and a 56 per cent increase on 2023.

Shipbuilder Fincantieri sues US supplier over faulty fire panels

Company allegedly sold ‘fraudulently represented’ and ‘unsafe’ products to Italian group causing over $100mn in damages

Italian shipbuilder Fincantieri is suing a US supplier after allegedly suffering more than $100mn in damages from “fraudulently” certified insulation panels for its ships.

According to a claim filed in Ohio last month, New York-listed Owens Corning’s Helsinki-based subsidiary Paroc sold “fraudulently represented and inherently unsafe” products to the Italian group, which it had fitted into several ships, including Switzerland-based MSC’s luxury cruise liner whose maiden voyage was delayed in 2023 because of the safety hazard.

Fincantieri was forced to halt delivery on ships after Owens Corning and Paroc recalled the faulty panels “to prevent potentially serious injury or death resulting from the sale and use of a defective and unsafe line of stonewool insulation products”.

In 2023 the Financial Times reported that the launch of MSC’s 248-metre-long Explora I luxury cruise ship had been delayed at the eleventh-hour because of faulty fire-resistant panels fitted to the vessel as well as to 45 others belonging to several global cruise operators. Paroc’s insulation panels were designed to resist flames for 60 minutes, as required by EU law, but the revelation that the panels had lost their safety certification following a retest had sent shockwaves across the industry. 

Fincantieri claimed that Paroc, backed by its owner Owens Corning, had initially obtained the safety certifications “under false pretences by submitting altered materials for testing that had been manipulated to better meet the testing requirements” despite the products being different from those which were actually being manufactured for sale.

Tests carried out by Danish maritime authorities in 2023, following a complaint lodged by another panel manufacturer, caused Paroc to lose its safety certifications after it emerged the panels did not meet the standards and could only resist flames for 45 minutes.

Following the delayed launch of the MSC vessel, Fincantieri found another 10 of its ships, including several military ones, some of which already in service, that carried faulty insulation panels. Their replacement caused delivery delays and the payment of penalties, Fincantieri said in the complaint. 

Delivery of the newly completed MSC cruise ship Explora I, which had been set for June 29, 2023, was postponed by 21 days while delivery of another ship Explora II was also postponed, according to the claim, resulting in significant costs and damages. The delay also led to the shipbuilder postponing the delivery of a third cruise ship, resulting in further costs and damages.

“In addition to causing over $100mn in economic damages, the product safety recall has caused Fincantieri to bear the brunt of considerable harm to its reputation and goodwill in the industry making headlines in the Financial Times and elsewhere after launches of new cruise ships that had already been booked [by customers] had to be delayed,” the shipbuilder said in the complaint. 

It also alleged that Owens Corning did not instruct shipbuilders to put remedies in place for the faulty products fitted on the dozens of ships already in service in spite of the outcome of an independent risk assessment it had commissioned which highlighted the “high risk for safety on board the ships”. 

Fincantieri declined to comment on the case. Owens Corning said it was aware of the legal matter involving Paroc, but declined to comment on pending litigation.

Scottish wind farms paid not to generate nearly 40% of potential electricity

Data highlights concerns over the increasing cost of curtailment for consumers

Scottish wind farms were paid not to produce 37 per cent of their planned output during the first half of this year, as the electricity could not be used locally or moved to where it was needed.

The four terawatt hours of curtailed output in northern Scotland would have been enough to power all of Scotland’s households for the entire six-month period, according to research from energy analytics firm Montel.

Wind farms in the area accounted for 86 per cent of the total 4.6 terawatt hours of electricity curtailed across Britain — 15 per cent higher than in the same period last year.

The figures are likely to fuel concern about inefficiencies in the design of Britain’s rapidly evolving electricity system and the impact on all consumers’ energy bills. 

Rising wind farm curtailment volumes in recent years have sparked criticism among some industry leaders and raised questions for politicians.

“Curtailed volumes of electricity are rising on average and may continue to do so as more renewable capacity comes online,” said Fintan Devenney, senior analyst at Montel, urging government and industry to work together to try and solve the problem. 

The increase comes as more wind farms have been developed in remote areas in Scotland, including in the Moray Firth off the north-east coast, where there is little demand for electricity and not yet enough cable capacity to move their output to consumers further south.

Power stations can agree to sell their output into the wholesale market regardless of where they are located, which in the case of wind farms often means they are planning to produce more than can actually be used given grid constraints.

The government’s National Energy System Operator (Neso) steps in throughout the day to make sure generators are not producing more than the local grid can manage and that users receive what they have ordered. 

The operator frequently has to pay wind farms in remote areas to switch off, while at the same time paying gas-fired generators in other parts of the country to increase their output. 

“Chronic under-investment in the grid over the past few decades has resulted in these constraint payments,” said one industry executive. “Grid upgrades will provide the capacity to help transport the power to demand in the south.”

Proposals to erect large pylons across rural Scotland have sparked resistance in local communities, some of which argue against new rural energy infrastructure when Scotland has sufficient generation capacity for its domestic needs.

Neso spent almost £117mn on getting the wind farms in northern Scotland to switch off during the six months, according to Montel, mostly making up for subsidies they would have received if they had generated. Its costs for balancing the network are charged to all consumers’ bills.  

Neso added that it was determined to play its part in keeping the costs of balancing the system as low as possible for customers, and that it had “saved consumers at least £1.2bn over the past two years across the costs within our control”.

The report, shared with the Financial Times, noted that almost 30 gigawatts of additional wind generation capacity was set to be built in Scottish waters following the major ScotWind seabed leasing auction in 2022, potentially worsening the curtailment problem.  

However, subsidy arrangements are being tightened up in a way that may encourage developers to switch off of their own accord during periods of oversupply.

The Department for Energy Security and Net Zero said Neso’s analysis had shown it was possible to produce clean and cheaper power by 2030 even when factoring in constraint payments.

It added it was “delivering the biggest upgrade in Great Britain’s electricity network in decades, which will minimise constraint costs”.

Scottish energy secretary Gillian Martin said. “I have been clear that the current UK energy system is not fit for purpose. Significant investment is required to achieve a clean power system.”

Big Oil heeds call to ‘drill, baby, drill’ as green transition slows

Energy groups are refocusing on exploration in anticipation of the world remaining hooked on fossil fuels for decades

The world’s leading oil companies are stepping up their hunt for new oil and gas reserves, as a slower than expected transition to clean energy sets the stage for stronger fossil fuel demand for decades to come.

Executives from BP, Chevron, ExxonMobil, Shell and TotalEnergies all used recent earnings calls to highlight how they have begun refocusing on securing new reserves after years of prioritising renewables.

Expectations for a rapid energy transition have moderated in recent years, as elevated inflation and interest rates raised costs and slowed development of renewables.

Geopolitical instability has led governments to prioritise energy security over decarbonisation. US President Donald Trump has directed oil and gas producers to “drill, baby, drill”.

Wood Mackenzie estimates a slower transition could leave the world needing about 5 per cent more oil per year than previously forecast from the mid-2030s. The energy consultancy forecasts that the world will require more than 100bn extra barrels of oil and gas from exploration by 2050 to help fill this gap.

The expectation of greater demand is raising concerns that years of under-investment have left the industry unprepared.

Jessica Ciosek, head of Americas exploration research at Wood Mackenzie, said there was a “huge need” for more oil and gas.

“There is a very big supply gap that M&A cannot solve for in the long run. Companies are refilling a pipeline, not just in drill-ready prospects, but in access to the areas where they would consider drilling.”

Ciosek noted the industry was playing catch-up after neglecting exploration earlier in the decade, choosing instead to focus on slashing costs and gearing up for a quick shift to clean energy.

Last year, a total of 5bn barrels of oil were discovered, according to Rystad, another energy consultancy, equivalent to just 19 per cent of the world’s annual production.

The most striking pivot has come at BP, which spent $15bn since 2021 pursuing a clean-energy strategy that alienated investors.

Under pressure to boost profitability and replace reserves, BP announced in February it would sharply increase investment in oil and gas.

The company now plans to drill 40 exploration wells over the next three years and recently made its biggest discovery in 25 years off the coast of Brazil. Speaking to analysts this week, BP chief executive Murray Auchincloss hailed its recent string of 10 discoveries as historic.

Chevron is also changing tack after years of prioritising cost-cutting and shale investments over riskier deep-water opportunities, which reduced its oil reserves to 9.8bn barrels last year, the lowest in more than a decade.

Chief executive Mike Wirth told analysts on an earnings call this month that he was “not happy with the results out of exploration over the last few years”. In May, he said the company had expanded its “pipeline of future opportunities” by adding 11mn new exploration acres since 2024.

ExxonMobil is branching out after spending the past decade focused largely on Guyana, where it has found nearly 11bn barrels. This week the company signed a deal to study four offshore blocks in Libya, and it is preparing to resume exploration activities in Trinidad and Tobago after a two-decade hiatus.

Explaining the moves to analysts this month, Darren Woods, Exxon’s chief executive, said exploration was a “treadmill we have to stay on”.

TotalEnergies and Shell have similarly underscored their commitment to finding new reserves.

Patrick Pouyanne, chief executive of TotalEnergies, said the French energy major had “reloaded the exploration portfolio” by winning new permits in the US, Malaysia, Indonesia and Algeria.

Shell chief executive Wael Sawan promised “some exciting wells” in the next six to 12 months, highlighting the importance of important basins such as the Gulf of Mexico, Malaysia, and Oman.

“There’s an industry-wide sentiment now that while the energy transition is happening, it is not nearly as rapid as we thought it would be,” said Palzor Shenga, senior upstream analyst at Rystad.

“Even by 2050, oil and gas will still account for about half of the energy mix. There’s a substantial gap to be filled,” he added.

Despite this renewed emphasis, exploration spending remains well below the peaks of the 2010 to 2015 boom years. However, BP and Chevron argue that new technologies enable them to step up exploration without a commensurate increase in budgets.

Chevron, for example, is deploying suitcase-sized nodes on the ocean floor, filled with batteries, clocks and other components. They enable the company to track seismic reflections and produce sharper images, helping to locate oil and gas deposits even in complex geology.

Liz Schwarze, Chevron’s vice-president of exploration, said new seismic and artificial intelligence technologies were reducing data-processing times from months to minutes.

BP cited similar technological breakthroughs that recently enabled it to plan and drill a complex well in Azerbaijan in days rather than months.

However, Fraser McKay, head of upstream analysis at Wood Mackenzie, cautioned that oil majors needed to rebuild expertise and a strong portfolio of “drill-ready” prospects.

“Companies want to do more exploration [ . . . ] but there’s a need to replenish the portfolio,” he said. “If you look at their annual reports it looks like they have got entire countries under license, but in actual fact drill-ready prospects are much fewer and far between”.

AI power demand and support from Trump administration has boosted the industry

Three nuclear energy developers are seeking to raise more than $500mn through mergers with special purpose acquisition companies as investors rush to tap into an atomic energy boom.   

Terra Innovatum, Terrestrial Energy and Eagle Energy Metals said the transactions, which they expected to be completed by the end of the year, would accelerate the development of small modular reactors.

Several other companies developing nuclear technologies are considering listings via initial public offerings, including Holtec International and Quantum Leap Energy, a division of ASP Isotopes.

“Investors now realise that nuclear energy is here to stay because it is needed to power the artificial intelligence revolution and this is turbocharging interest, particularly in the US,” said Nick Lawson, the chief executive of Ocean Wall, an investment group advising ASP Isotopes on the QLE spin off.  

Shares in nuclear energy companies surged near record highs last week as optimism about a nuclear renaissance gathered pace owing to AI power demand and political support from the Trump administration. 

Last month Westinghouse outlined plans to build 10 large nuclear reactors in the US at a meeting in Pittsburgh attended by President Donald Trump, who has set a target of quadrupling American nuclear power capacity in the next 25 years.  

“2025 for nuclear technology is what 1995 was for the tech sector,” said Simon Irish, Terrestrial Energy’s chief executive, referring to the start of a 30-year tech growth cycle sparked by Microsoft and Netscape’s promotion of the internet.    

“Many investors have now converged on the unavoidable conclusion about energy choice: we can’t meet surging power demand in an environmentally responsible way without nuclear,” he said. “I’m having conversations with investors now that I wouldn’t have been able to engage three years ago.”

Terrestrial is aiming to raise $280mn through a combination with HCM II Acquisition Corp — whose chief executive Shawn Matthews is the former CEO of Cantor Fitzgerald — to fund development of a nuclear reactor that uses molten salt rather than water as a coolant.

It is one of dozens of companies developing SMRs that typically generate about a third or less of the power of standard reactors.  

Terra Innovatum, which is seeking to raise $230mn, and Eagle Energy Metals are both developing SMRs. Eagle, which also has uranium mining assets, said it had secured a commitment of $30mn from an institutional investor.  

But experts caution the nuclear sector is prone to boom and bust cycles and cost overruns, which increase risk. Nuclear fuel supplier Centrus filed for Chapter 11 bankruptcy protection in 2014 following the Fukushima accident in Japan in 2011. Westinghouse sought protection in 2017 due to cost overruns at Vogtle in Georgia, the last nuclear plant constructed in the US.

In 2023 X-energy was forced to pull a $1.8bn Spac deal because of “challenging market conditions”.     

Spacs have made a comeback in the US this year after a boom in 2021, when billions of dollars flowed into the vehicles to fund commercial space ventures, flying taxi firms and other speculative ventures. The frenzy quickly fizzled out because of a market downturn triggered by rising interest rates.

The median price performance of the 29 private companies that have gone public by merging with Spacs this year is a fall of 67 per cent, according to data provider ListingTrack. The vast majority of those companies also suffered steep declines four years ago.   

Some financiers argue that investors considering nuclear Spac deals should exercise caution.

“[Most nuclear companies’] primary assets are a ticker symbol and a set of glossy renderings. If it sounds similar to the electric vehicle Spacs of barely four years ago, it’s because it is,” said one executive at a medium-sized US hedge fund, referring to a series of EV deals that went on to lose investors millions of dollars. 

Despite the risks, investor enthusiasm for nuclear has roared back following a series of power deals struck between developers and technology giants Google, Amazon and Microsoft to supply internet data centres.

But investors have been frustrated by the limited number of listed public companies, according to analysts.

“There is a lot of investor enthusiasm around nuclear, but only a few public companies to choose from and evaluate — having more options would be a welcome development,” said Marc Bianchi, an analyst at TD Cowen.  

The company looks forward to focusing on integrating Neiman Marcus now that the controversial exchange is done.

Saks Global has buttoned up its latest financing package early.

The retailer said it received $300 million in connection with its debt exchange offer on Friday, rounding out the $600 million package it revealed in late June.

About 98 percent of the eligible bondholders agreed to exchange their notes.

The deal could bring the temperature down on the Saks financial drama — at least for now.

To buy Neiman Marcus Group, Saks took on $2.2 billion in debt from bondholders in December, just as Wall Street was feeling giddy over what many hoped would be more business-friendly policies from a second administration of U.S. President Donald Trump.

But when the reality of having Trump back in the White House led to a trade war with the world and the retail outlook dimmed, bondholders got spooked, particularly since a little-noticed provision in the bond prospectus allowed Saks to pile as much debt as it wanted onto its Fifth Avenue flagship.

Saks was already fending off vendors over slower payment terms and late back payments when a meltdown in the bond price added a sense of uncertainty — again — to the company and its finances. The retailer’s bonds traded at around 30 cents on the dollar for a time, but the company was able to negotiate a deal with some bondholders that eventually brought along the rest of the pack.

Now Saks is limited in how much debt the Fifth Avenue flagship can carry, leaving the building to stand as collateral for the bondholders in the event of a bankruptcy.

While many lenders and vendors to the company have been worrying over the potential of a bankruptcy for months, the retailer clearly sought to present the completion of the exchange as the final turning of the page on what’s been an uncertain and disruptive time.

Marc Metrick, chief executive officer, said: “With this transaction, we are embarking on Saks Global’s next chapter, with the financial flexibility to drive long-term value and growth for our stakeholders, particularly our brand partners. Our bolstered liquidity position, combined with our improved inventory flow and the work we have done to strategically integrate our businesses, positions us to continue executing on our strategy to advance the luxury shopping experience for our customers. We thank our bondholders for their continued confidence in our business.”

Metrick works closely with Saks Global’s executive chairman Richard Baker, who for years dreamed of buying Neiman Marcus and combining the two luxury department store powerhouses.

Together they have a vision that has lots of moving parts — from the new terms with vendors to a Saks presence on Amazon and a new single operating structure for the two chains.

But in the run-up of the deal and this year, vendors complained, bitterly at times, about not being paid for shipments, in many cases not for several seasons. And while Saks promised to make good on its bills — and some vendors have been paid — other suppliers have continued to privately complain that the money is always on the way, but still slow to arrive.

A source close to Saks said of the finalization of its latest financing package: “Now you’re going to not hear from brands anymore about not getting paid. You’re not going to hear from brands anymore about concerns. You’re not going to hear anymore from that side of the equation.”

But the world might well be hearing a little more about Saks’ finances before the spotlight will be able to the big luxury retail “reset.”

That’s because debt watchdog Standard & Poor’s previously said it viewed the financing as “tantamount to a default” since bondholders “will receive less value than they were initially promised and will rank lower in terms of priority than the new money notes.”

S&P said it expected to lower its rating on Saks to “selective default” or “default” after the financing was completed.

That “selective default,” if were to come, is a technical distinction that stems from the bonds being exchanged for new debt below par.

The new bonds have not yet been rated.

Now Metrick and Baker have to convince the market that the they’ve solved the Saks financial equation.

A 23-year-old former OpenAI researcher quickly amassed more than $1.5 billion for ‘brain trust on AI’

Leopold Aschenbrenner, a 23-year-old AI influencer, started Situational Awareness, an AI-focused hedge fund that now manages over $1.5 billion.

Situational Awareness gained 47% in the first half of the year, outperforming the S&P 500 and tech hedge funds.

Other firms are launching AI-focused funds, including Value Aligned Research Advisors and Point72 Asset Management, to capitalize on the AI boom.

Leopold Aschenbrenner emerged last year as a precocious artificial-intelligence influencer after publishing a widely read manifesto. Then he decided to try his hand at stock picking.

The 23-year-old with no professional investing experience quickly raised more money for a hedge fund than most pedigreed portfolio managers can when they strike out on their own.

As valuations of Nvidia, OpenAI and other artificial-intelligence companies continue to soar, so do investments in hedge funds hoping to ride the AI wave.

Aschenbrenner’s San Francisco-based firm, Situational Awareness, now manages more than $1.5 billion, according to people familiar with the matter. He has described the firm as a “brain trust on AI.”

His strategy involves betting on global stocks that stand to benefit from the development of AI technology, such as semiconductor, infrastructure and power companies, along with investments in a few startups, including Anthropic. He told investors he plans to offset those with smaller short bets on industries that could get left behind.

Situational Awareness gained 47% after fees in the first half of the year, one of the people said. In the same period, the S&P 500 gained about 6%, including dividends, while an index of tech hedge funds compiled by research firm PivotalPath gained about 7%.

Aschenbrenner, a native of Germany, briefly worked as a researcher at OpenAI before being pushed out. He named Situational Awareness after the 165-page essay he wrote about the promise and risks of artificial superintelligence. He recruited Carl Shulman, another AI intellectual who used to work at Peter Thiel’s macro hedge fund, as director of research.

The firm’s backers include Patrick and John Collison, the billionaire brothers who founded payments company Stripe, as well as Daniel Gross and Nat Friedman, whom Mark Zuckerberg recently recruited to help run Meta’s AI efforts. Graham Duncan, a well-known investor who organizes the Sohn Investment Conference, is an adviser.

“We’re going to have way more situational awareness than any of the people who manage money in New York,” Aschenbrenner told podcaster Dwarkesh Patel last year. “We’re definitely going to do great on investing.”

In another sign of the demand for Aschenbrenner’s services, many investors agreed to lock up their money with him for years.

Other recent launches include an AI-focused hedge fund from Value Aligned Research Advisors, a Princeton, N.J.-based investment firm founded by former quants Ben Hoskin and David Field. The fund, launched in March, has already amassed about $1 billion in assets, a person familiar with it said. VAR also manages about $2 billion in other AI-focused investment strategies.

VAR’s investors have included the philanthropic foundation of Facebook co-founder Dustin Moskovitz, according to regulatory filings reviewed by fund-data tracker Old Well Labs.

Veteran hedge-fund firms are entering the fray, too. Last year, Steve Cohen tapped one of his portfolio managers at Point72 Asset Management, Eric Sanchez, to start an AI-focused hedge fund that Cohen planned to stake with $150 million of his own money. Assets at the fund, called Turion—after AI theorist Alan Turing—now exceed $2 billion, people familiar with the matter said.

Turion is up about 11% this year through July after it gained about 7% last month, the people said.

It is no surprise that thematic funds are springing up to capitalize on the AI frenzy. In years past, hedge funds that specialized in the transition to clean energy and investing with an environmental, social and corporate-governance lens proliferated in response to client demand.

Identifying a winning theme isn’t the same thing as trading it well. Investors’ tastes can be fickle; many prominent ESG hedge funds have either shrunk or gone out of business.

The market swoon that followed the January release of an advanced, low-cost language model from Chinese company DeepSeek showed the fragility of the valuations of AI winners, though the market has roared back since then.

AI-focused investors argue the long-term trend of development and adoption are inevitable, even if there are bumps along the way.

With only so many publicly traded companies that operate in the AI-adjacent economy today, stock picking funds often pile into the same positions as one another and more generalist hedge funds. Vistra, a power producer that supplies the juice to AI data centers, was a top-three U.S. position of both Situational Awareness and VAR Advisors as of March 31, according to their most recent securities filings.

Other hedge-fund managers are debuting funds to make investments in privately held AI companies and startups. Gavin Baker’s Atreides Management teamed up with Valor Equity Partners to launch a venture-capital fund earlier this year that has raised millions from investors including Oman’s sovereign-wealth fund. Each firm separately invested in Elon Musk’s xAI.

At least one portfolio manager is planning an AI hedge fund as a comeback vehicle. Sean Ma wound down his Hong Kong-based firm, Snow Lake Capital, after it agreed to pay about $2.8 million to settle Securities and Exchange Commission charges last year that the firm participated in stock offerings of companies that it had also bet against.

Ma took over an investment firm called M37 Management in Menlo Park, Calif., earlier this year. He is currently fundraising for a hedge fund focused on AI software and hardware.

Record butter prices leave bakers with indigestion

Squeeze on butter churns exacerbated by huge demand for whey protein, originally a waste product of cheesemaking

One of life’s little culinary pleasures — taking a bite out of a freshly baked croissant — grows ever more expensive. Across the globe, record butter prices threaten the affordability of an everyday indulgence.

The UN Food and Agriculture Organization’s butter price index is at an all-time high, according to the latest reading in June. An imbalance between supply and demand suggests little relief in sight. At the most recent Global Dairy Trade auction, which helps set the direction for dairy prices, butter reached an average of more than $7,200 per metric tonne. While that is down from the highs set in May, it is still 54 per cent higher than two years ago. 

In Poland, the cost of butter was elevated enough that the government announced plans in December to sell off 1,000 tonnes of its reserves in a bid to curb the surge. In New Zealand, the issue has become a topic of political recrimination. In France, where butter consumption per capita is among the highest in the world, there are growing concerns over supply shortfalls. Grim news for lovers of the Kouign-amann, a Breton pastry made nearly 30 per cent of butter.

The ​​​​problem with butter starts with milk. The global dairy industry is experiencing a decline in milking cow herds amid droughts and diseases. That has kept a lid on production. World milk supplies from five leading producer regions — the EU, US, New Zealand, Argentina and Australia — is forecast to grow less than half a percentage point this year.

In the hierarchy of dairy processing, bottlers are typically first in line to get milk. Then come makers of ice cream, yoghurt, cheese and butter. In recent years, competition for cream — a key component of butter — has grown as low-fat diets have faded in popularity and consumers, especially in the US, Middle East and Asia, return to higher-fat dairy products.

The squeeze on butter churns has been further exacerbated by the explosion in demand for whey protein. Originally a waste product of cheesemaking, whey is now a multibillion-dollar industry, giving dairy processors more reasons to devote more milk to making cheese instead of butter.

The high price of butter will be felt by food and confectionery makers who are already facing high costs for cocoa after prices for beans hit a record earlier this year. Those who make premium products — or bakeries with a captive audience — will presumably do their best to pass along higher raw ingredient costs to buyers of dairy-based goodies and flaky breakfast treats. Quel dommage!