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To avoid more red ink, the president has to unite Democrats behind his infrastructure and social plans and make sure tax increases aren’t repealed

WASHINGTON—President Biden’s $1.9 trillion Covid-19 relief package was financed entirely with borrowed money. Now, he is proposing to spend another roughly $4.5 trillion on infrastructure and social programs—without adding to the red ink.

“We can do it without increasing deficits,” Mr. Biden said in a joint address to Congress Wednesday night, detailing a series of tax increases on the wealthy and corporations to pay for programs ranging from building charging stations for electric cars to subsidizing child care.

Mr. Biden’s ability to spend what he proposed without adding debt depends on a range of political and economic variables, some beyond his control. Among them: Whether moderate Democrats will go along with his proposed tax increases, and whether those increases will stay in place long enough to cover all of the extra costs.

Taken together, the proposals would add roughly $1.3 trillion to government deficits over the next 10 years, according to estimates by analysts at the Committee for a Responsible Federal Budget and Cornerstone Macro Research. They say the shortfalls would eventually be made up in the following years as tax increases continue and some of the spending winds down. Over time, they add, the national debt, which represents decades of accumulated budget deficits, may begin to decline as a share of economic output.

“I think it is clear that the framework for these proposals is to spend early, create a lot of investments that they think are going to have perpetual returns to the economy, and reduce the very long-term debt,” said Marc Goldwein, senior vice president at the nonpartisan CRFB, based in Washington.

But Mr. Goldwein said relying on revenue more than 10 years in the future is risky. When Democrats passed the Affordable Care Act in 2010, they included provisions to raise revenues that have since been repealed.

Federal deficits, which were historically high and rising before the pandemic, have soared since March 2020 as Congress enacted several spending measures to combat the virus and cushion the U.S. economy from a recession, and as widespread business closures and layoffs weighed on tax revenue.

That drove U.S. debt held by the public from $17.4 trillion before the pandemic hit to $21.6 trillion when Mr. Biden took office, or roughly 100% of economic output—putting the U.S. in a league with highly indebted countries such as Japan. Some economists have warned that deficit-fueled spending could drive up interest rates and boost inflation, though that hasn’t happened in the U.S. or Japan in recent decades.

Republicans have pointed to the rise in government debt as a reason for spending restraint, and they warn that tax increases could hurt the economy by discouraging private investment. Sen. Tim Scott (R., S.C.), who delivered the GOP response to Mr. Biden’s congressional address on Wednesday, called his plans “a liberal wish list of big government waste.”

Some Democrats have noted that the $1.5 trillion in GOP tax cuts enacted in 2017, which Republicans said would pay for themselves by spurring growth, contributed to wider budget deficits before the pandemic.

Recent years have seen a shift in the consensus among many economists over the dangers of deficits and debt, with some, including Mr. Biden’s own advisers, arguing that in an era when interest rates and inflation are projected to remain very low, the U.S. has the capacity to borrow more than previously thought prudent.

Mr. Biden embraced those arguments when he called for a $1.9 trillion, deficit-financed Covid-19 relief package, saying it was worth borrowing to propel the U.S. recovery and avoid long-term damage to the economy.

The relief package enacted in March, known as the American Rescue Plan, is expected to increase the national debt as a share of the economy to 108% for the 2021 fiscal year, from 102% before it was enacted, according to the CRFB.

Now, Mr. Biden has proposed two more packages—one focused on infrastructure and the other on families—that he says will lift growth over the long run with new spending on roads, bridges, research and development, clean energy, affordable child care and paid family leave, among other programs.

To pay for these plans, he wants to raise the corporate tax rate to 28% from 21%, increase the top capital-gains rate to 43.4% from 23.8%, and tax gains on assets as if they were sold when someone dies—proposals that would generate enough revenue over the next 15 years to offset the spending increases and expanded tax credits, the White House says.

Treasury Secretary Janet Yellen said Sunday that interest rates are low and likely to remain low, “but we do need fiscal space to be able to address emergencies, like the one that we’ve been in with respect to the pandemic.”

“We don’t want to use up all of that fiscal space, and over the long run deficits need to be contained to keep our federal finances on a sustainable basis,” she said on NBC.

Altogether, the two new packages call for about $4.5 trillion in new spending and tax credits and $3.2 trillion in revenues over the next 10 years. The revenue gap, about $1.3 trillion, would be covered by higher taxes over the following five years, the White House says.

The CRFB estimates that Mr. Biden’s $2.3 trillion infrastructure proposal, which also includes $400 billion in clean-energy tax credits and is dubbed the American Jobs Plan, would increase deficits by about $900 billion over 10 years, boosting the debt to 116% of gross domestic product by 2031.

After that, the plan would begin to shrink deficits, and debt would grow to 146% of GDP by 2041, or less than the 149% currently projected by the Congressional Budget Office.

For this to occur, however, Mr. Goldwein said policy makers would have to allow temporary spending programs such as an expanded child tax credit to expire as scheduled and make sure permanent tax increases remain in place—factors that depend on which party controls Congress and the White House.

The CRFB estimate is in line with an analysis from the Penn Wharton Budget Model, which found that Mr. Biden’s infrastructure plan would increase the debt over 10 years but reduce it substantially by 2050 compared with current CBO projections.

While the higher taxes help the fiscal outlook, Penn Wharton found they would ultimately reduce economic growth by discouraging business investment.

Finally, the American Families Plan, which includes universal preschool, two years of free community college and a national paid parental leave program, calls for $1.8 trillion in new spending and $1.5 trillion in tax increases over the next 10 years.

Mr. Biden’s spending and tax proposals in the infrastructure and families packages, taken together, appear to pay for themselves over 15 years, but uncertainties remain, said Donald Schneider, an analyst with Cornerstone Macro Research and a former GOP congressional aide.

For example, the administration estimates that its proposal to boost funding for the Internal Revenue Service by $80 billion over the next decade to increase tax enforcement would generate about $700 billion in additional net revenue over the period, more than other estimates have suggested, he said.

It is also an open question whether Mr. Biden can win enough support in Congress to advance all his plans. With Republicans opposed to new large spending programs and tax increases, the president will need the support of nearly every Democrat.

Some moderate Democrats, including Sen. Joe Manchin of West Virginia, have expressed reservations about his tax increases. If Democrats don’t get behind all of his tax proposals, Mr. Biden may be forced to accept some deficit increases or scale back his spending plans, a move that would draw objections from progressives.

Transaction values the cloud-based integration platform at $4 billion including debt

Dell Technologies Inc. DELL -1.67% struck a deal to sell its Boomi cloud business to private-equity firms Francisco Partners and TPG, part of a larger reordering of the PC and data-storage giant.

The transaction, announced Sunday, values the Chesterbrook, Pa., cloud-based integration platform at $4 billion including debt.

The Wall Street Journal had earlier reported that Dell was nearing a deal to sell Boomi to the private-equity firms.

Boomi, which Dell acquired in 2010, makes software that helps applications communicate with each other by transferring data between them. It is a player in a fast-growing market known as iPaaS, which stands for integration platform as a service. When a business makes a sale, it might need aspects of that sale to be reflected in other applications such as those that keep tabs on financial forecasts or maintain customer databases. Most business applications aren’t currently able to share data with one another without the help of software like Boomi’s.

In 2016, Francisco Partners teamed up with Elliott Management Corp. to acquire Dell Software Group, which included Boomi as well as the Quest and SonicWall businesses. Dell wasn’t interested in parting with Boomi at the time but has decided to do so now after a broader strategic review that resulted in the announcement last month that it would spin off its 81% stake in VMware Inc., according to people familiar with the matter.

VMware, a major player in the market for cloud software, has a market capitalization of nearly $70 billion, but investors have been frustrated, believing its value hasn’t been reflected in Dell’s share price. While Boomi is fast-growing, it doesn’t produce a lot of profit, the typical metric by which Dell’s shares are valued, the people said.

Investors have cheered Dell’s move to part with VMware, with the stock roughly tripling from its pandemic low in March of last year. The shares closed Friday at $98.33, giving the company a market value of about $75 billion.

Based in San Francisco, Francisco Partners focuses on partnering with technology companies. Founded over 20 years ago, it has made over 300 investments and manages more than $25 billion in assets.

TPG manages more than $91 billion in assets and has offices around the world. The firm is doing the Boomi investment out of its big buyout strategy, known as TPG Capital.

“Both of our firms have really distinguished ourselves in technology carve-outs,” DJ Deb, chief executive of Francisco Partners, said in an interview. “Dell was very focused on who was going to take care of their baby.”

In October, Francisco announced a deal to buy cybersecurity company Forcepoint from Raytheon Technologies Corp. and in November said it was buying the international business of automotive-software company CDK Global Inc. TPG bought Wind River and a majority stake in McAfee LLC from Intel Corp. , and it announced a deal in February to buy a stake in DirecTV from AT&T Inc.

Together, the two firms hope to continue to accelerate Boomi’s growth by investing more in the business.

“Software is eating the world,” said Nehal Raj, a partner at TPG who leads its investments in software. “The average enterprise has about 850 applications, and today, less than 30% of them actually talk to each other.”

Japanese brewer follows peers as consumers seek wellness products following Covid-19 pandemic

Asahi wants to crack a market that has proved surprisingly resilient during the coronavirus pandemic: non-alcohol drinks.

Asahi’s decision followed a $20bn splurge on beer brands including Peroni, Pilsner Urquell to Carlton Draught in recent years. But a consumer focus on all things “wellness” has been strengthened by Covid-19. Sales of low and non-alcoholic drinks rose during the pandemic even as pub closures have led to a global decline in beer sales.

“Non-alcohol is a good all-around product,” Atsushi Katsuki, Asahi’s chief executive since March, said in an interview. “It helps to resolve social issues, it connects us with new users and it leads to our profitability.”

Low and non-alcohol beer sales have benefited as people spent more on drinks to be consumed at home during lockdowns, suiting Asahi’s broader strategy of focusing on higher-margin “premium” beverages.

The shift has also been supported by pressures in Japan, where beer volumes have fallen for more than two decades and the government has tightened its crackdown on heavy alcohol consumption.

In Europe, sales of Asahi’s non-alcohol brew grew 10 per cent in 2020 compared with the previous year, driven by the popularity of brands such as Birell and Peroni Libera — even as those of beer fell 6 per cent on a volume basis. Asahi has said it wanted to quadruple its ratio of non-alcohol drink sales in Europe by 2030, from 5.1 per cent last year.

The company, which is known in Japan for its flagship Super Dry brand, launched a low-alcohol product called Beery in March, using technology from European drinks it acquired to recreate a beer beverage with reduced alcohol content. It aims to triple its ratio of beverages with 3.5 per cent alcohol or less to 20 per cent of its product mix by 2025.

“This isn’t just about changes in consumption among the young,” said Katsuki. “Until now, we were not able to offer options for different circumstances to address people who can drink but won’t or people who want to drink but can’t.”

The volume of sales of low and no-alcohol drinks is projected to grow 10.7 per cent annually in the US, 6.6 per cent in the UK and 6.5 per cent in Japan between 2020 and 2024, according to drinks analytics group IWSR.

Rivals such as Anheuser-Busch InBev and Heineken have also been building non-alcoholic portfolios. But analysts have taken a wait-and-see stance about how much these products will contribute to earnings, with the low and no-alcohol market accounting for less than 2 per cent of that for intoxicating drinks. Asahi’s operating profit fell a third last year, as it relied heavily on sales at restaurants and pubs.

Katsuki, 61, took over the world’s seventh-largest brewer in a drastically more difficult business environment than the previous five years, when Asahi spent billions scooping up European and Australian assets from AB InBev, including Grolsch and Carlton & United Breweries.

The company has ruled out any big acquisition until 2024, by which time it hopes to have reduced its net debt to three times earnings before interest, tax, depreciation and amortisation, compared with its current level of six times.

“We are discussing internally whether our current portfolio and footprint is sufficient. There is also the question of whether it is OK to just have beer,” Katsuki said.

Most big investors sceptical over oil majors’ green ambitions

Survey of institutional shareholders raises questions about their rhetoric on engagement

Fewer than a fifth of big investors are confident that oil companies will successfully transition to become greener businesses, despite intense pressure from shareholders to cut carbon emissions and pledges from fossil fuel companies to overhaul their operations.

Many oil companies, including Royal Dutch Shell and BP, have outlined climate transition strategies and ambitions to become net zero businesses over the past 18 months.

However, a survey of 64 institutional investors, with almost $11tn in assets, found that only 17 per cent believe oil groups will transform their businesses to focus on green energy.

“Big Oil’s greening efforts have moved into overdrive but investor consensus remains unconvinced about their ability to reinvent themselves,” said Alastair Walmsley, chief executive of Procensus, the data provider for institutional investors that carried out the research.

Large fund managers, pension funds and activist groups have piled pressure on oil and gas companies over their response to climate change in recent years, with initiatives such as the Climate Action 100+ investor group calling for fossil fuel companies to overhaul how they operate.

But the survey raises questions about why investors are spending so much time, effort and money engaging on the issue if few believe oil companies will change their businesses.

There are two main schools of thought among big climate-conscious investors: those who believe it is better to rid their portfolios of fossil fuels, and those who choose to stay invested but use their power as shareholders to convince companies to change their stripes.

Fiona Reynolds, chief executive of the Principles for Responsible Investment, a UN-backed network of investors, said shareholder engagement with companies remained vitally important.

“Invariably, some companies will make the transition while others will not,” she said. “Investors need the right information and data from companies about their net zero commitments and how these will be achieved so they can make informed decisions about whether to hold these companies in their portfolios over the longer period.”

Almost half of investors polled by Procensus said big fossil fuel groups were investable because they would benefit from another oil price cycle — with share prices going up on the back of a rise in the oil price — before net zero becomes an issue.

A separate recent study from Procensus, of investors with $4tn in assets, found a majority (62 per cent) wanted oil companies to focus on upstream projects rather than renewables. 

This stance is at loggerheads with the public statements by many big investors, who argue companies should prioritise cutting their carbon emissions.

Tracey Davies, executive director of Just Share, the investor advocacy organisation, said the poll “makes for depressing reading for those of us trying to get investors to be more ambitious in their engagements with fossil fuel companies”.

She added that if big investors “don’t believe that oil and gas companies can go green, why aren’t they calling for a managed decline and cash to be returned to shareholders, or voting against directors, or simply divesting, instead of repeatedly claiming that engagement with the sector is delivering results?”

Some investors are ramping up their engagement tactics, such as hedge fund Engine No. 1, which has turned up the heat on ExxonMobil by nominating its own slate of directors at the oil major.

If investors do not think fossil fuel companies will change, they should divest their holdings, invest in climate solutions and engage with companies in every other sector to push them to decarbonise, said Ellen Dorsey, of the Wallace Global Fund, a foundation that works on environmental and social issues.

“This is the only course of action for investors that is ethical, financially sound, and preserves core fiduciary duty,” she added. “If they don’t act and still own fossil fuels, then they own climate change. Full stop.”

More than half (55 per cent) of those polled for the Procensus survey were based in Europe, with 34 per cent in North America and 6 per cent in Asia.

Europe’s largest banks plan joint attack on US payments giants

More than 30 lenders designing rival to take on PayPal, Mastercard, Visa and Apple

More than 30 of Europe’s largest banks and credit card processors are trying to create a payments giant capable of shattering a US-dominated “oligopoly”.

A Brussels-based venture, which currently employs 40 payment experts, has until September to draw up a blueprint for a pan-European payments service that can be used to pay online as well as in stores, to settle bills between individual consumers and to withdraw cash at ATMs.

“The idea is to build a European payment champion that can take on PayPal, Mastercard, Visa, Google and Apple,” said Joachim Schmalzl, the chair of the European Payment Initiative.

The banks and acquirers behind the initiative include Deutsche Bank, BNP Paribas, ING, UniCredit and Santander and currently process more than half of all payments in Europe. The project has the backing of the European Commission as well as the euro area’s financial regulators.

EPI has so far received more than €30m from its backers, said Schmalzl. He is also a board member of the German Savings Banks Association, the country’s biggest retail banking group and staunch supporter of the initiative, which is still searching for a brand name.

The first real-world applications — a system for electronic real-time payments between consumers — could be launched in early 2022, while a broader payments tool could follow in the second half of next year, said Schmalzl.

Burkhard Balz, a Bundesbank board member, said that Germany’s central bank supported the EPI, which “would strengthen the strategic autonomy of the EU in the payments market, enhance competition and thus improve consumer choice”. The ECB has also welcomed the initiative.

Card payments in Europe are predominantly processed by US-based companies. Four in five transactions in Europe are handled by Mastercard and Visa, according to EuroCommerce, a lobby group of European retailers.

Schmalzl warned that such a dominant market share could hurt consumers and merchants — pointing to relatively high fees as well as questions over data protection. “We want to offer an alternative to this oligopoly and give merchants and consumers in Europe a real choice,” he said.

Previous pan-European attempts to challenge the US supremacy in payments have failed miserably. The “Monnet Project”, which in 2011 was backed by 24 European lenders, faltered because it lacked political backing and failed to develop a viable business model.

The barriers to entry are high because payments schemes are only attractive for merchants if many customers use them — and vice versa. “Overcoming this chicken-and-egg problem is the key obstacle,” said Marcus Mosen, a payments consultant and former chief executive officer of German payments firm Concardis.

A Deutsche Bank spokesperson said that a European payment scheme was needed “to remain independent”, and that Germany’s largest lender had joined the initiative “to support this joint effort of European financial institutions”.

Several countries have payment solutions that are successful in specific cases. For instance, Germany’s “Girocard” and France’s “Carte Bancaire” offer cheap access to cash and in-store payments, and the Netherlands has the “iDEAL” ecommerce payment system.

“The national solutions cannot be scaled across European borders,” said Schmalzl. He said the idea behind the EPI was to harmonise the best national initiatives and then roll them out across Europe.

“Nobody [in Europe] on its own can compete with the US credit card giants. That will be possible if we team up.”

The Brussels-based EPI team started nine months ago. After the summer, the consortium’s backers will decide whether they will push ahead with the idea, which would require significant additional funding. “As a level of investment, several billions of euros will be needed,” said Schmalzl, adding: “We can jointly muster the necessary resources if we team up in Europe.”

Credit Suisse made just $17.5m in Archegos fees in year before $5.4bn losses

Paltry revenues raise more questions about strategy of taking risks for wealthy clients

Credit Suisse made just SFr16m ($17.5m) of revenue last year from Archegos Capital, the family office whose sudden collapse in March caused the Swiss bank $5.4bn in losses, according to people with knowledge of the relationship.

The paltry fees Credit Suisse received from Archegos, whose implosion was one of the most devastating in recent history, raises further questions about the risks the lender was prepared to shoulder in pursuit of relationships with ultra-wealthy clients.

Archegos, which was run by former hedge fund manager Bill Hwang, borrowed tens of billions of dollars from at least nine global banks to speculate on volatile stocks. The lenders have collectively lost more than $10bn in the fallout.

Despite extending billions of dollars of credit to Archegos, Credit Suisse made just $17.5m from the relationship last year. The low level of fees and high risk exposure have caused concern among the board and senior executives, who are investigating the arrangement, according to two people with knowledge of the process.

The bank’s management is particularly alarmed after being told that Hwang was not a private banking client of the group, suggesting there was little incentive to pursue his prime brokerage business, the people said.

Credit Suisse also demanded a margin of only 10 per cent for the equity swaps it traded with Archegos and allowed the family office 10-times leverage on some transactions, according to people familiar with the trades and first reported by Risk.net. That was about double the leverage offered by fellow prime broker Goldman Sachs, which took minimal losses when unwinding its positions.

Credit Suisse has had to raise $1.9bn from shareholders to shore up its balance sheet on the back of the losses, while staff bonuses have been cut.

On Friday, António Horta-Osório was confirmed as the new chair of Credit Suisse and promised an urgent review of the bank’s risk management, strategy and culture.

“Current and potential risks of Credit Suisse need to be a matter of immediate and close scrutiny,” said the former Lloyds Banking Group chief executive. “I firmly believe that any banker should be at heart a risk manager.”

Credit Suisse’s board had already removed several senior executives, including chief risk and compliance officer, Lara Warner, and investment bank head, Brian Chin. Andreas Gottschling, who led the board’s risk committee, was forced to step down last week in expectation of a shareholder backlash.

Thomas Gottstein, the bank’s chief executive, has also announced it will cut a third of its exposure in its prime services business, the specialist unit that serves hedge fund clients and was at the centre of the Archegos crisis. The two heads of the prime division have also stepped down.

Credit Suisse does not disclose the amount of money it makes from its prime services division, but JPMorgan analyst Kian Abouhossein estimates the unit made $900m of revenues last year, just over a third of the total from its equities business.

Abouhossein said the prime brokerage generated bigger profit margins than other parts of the investment bank. “We see shrinkage as a material setback for the overall long-term viability of Credit Suisse’s investment bank,” he added.

While Credit Suisse is the biggest European provider of prime services, it significantly lags behind global leaders Goldman Sachs, Morgan Stanley and JPMorgan.

The largest investment banks pulled in $15.2bn in prime broking revenue last year, slightly less than the $16.5bn they made in 2019, as hedge funds reduced their borrowing during the pandemic, according to Coalition Greenwich, the data company. European banks accounted for less than a third of the revenues.

Credit Suisse declined to comment.

Commodities supercycle arrives as pandemic recedes

Sector-wide bull market gathers momentum

Ten years ago commodity markets were reaching peak supercycle exuberance as commodities trader Glencore readied itself for a blockbuster $60bn listing on the London Stock Exchange.

A decade later, a broad upswing in the price of key raw materials is reviving talk of a sector-wide “structural bull market” in commodities fanned by strong demand from China, government spending on post-pandemic recovery programmes and bets on the “greening” of the global economy.

“If we can hopefully see a relatively quick resolution to the [pandemic] situation in India, then in our lifetime we have not seen a macro economic set-up like this,” said Saad Rahim, chief economist at Trafigura, one of the world’s biggest independent commodity traders.

“We have gone from China being the only story in commodities for the last 10 years to now the rest of the world picking up the baton and being real contributors to the demand side of the equation.”

The past week has seen iron ore, the key ingredient needed to make steel, palladium, used by carmakers to limit harmful emissions, and timber all hit record highs. Key agricultural commodities including grains, oilseeds, sugar and dairy have also jumped up, with corn prices above $7 a bushel for the first time in eight years.

At the same time copper, the world’s most important industrial metal, traded above $10,000 for the first time since 2011, while soyabeans hit an eight-year high. The S&P GSCI spot index, which tracks price movements for 24 raw materials, is now up 21 per cent this year.

After being out of favour for most of the past decade, sector specialists’ predictions of another supercycle — a prolonged period of high prices as demand outstrips supply — have lured investors. 

The sector has also drawn support from fund managers seeking assets that will benefit as the global economy picks up speed after the pandemic, and that can also act as a hedge against rising inflation.

“President Biden has now proposed two additional stimulus plans on top of the one he has already passed. If any of that comes to pass you are just supercharging this whole thing. This is just getting started,” said Rahim.

China’s rapid recovery, still the world’s biggest consumer of raw materials, and increasingly Europe and the US, where the housing market is booming, have fuelled demand. Low inventories and Covid-related supply chain disruptions have added further fuel to the fire.

“I don’t know if we have seen anything like this before,” said Ulf Larsson, chief executive of Swedish pulp and timber company SCA, which announced a 66 per cent increase in first-quarter net profit on Friday. “We are in some kind some of perfect storm.”

A suite of raw materials needed for electric-vehicle batteries and electric motors, from lithium to rare earths, has also been swept up in the euphoria.

China’s appetite has driven prices for lithium carbonate and lithium hydroxide to rise by over 100 per cent this year, according to Benchmark Mineral Intelligence, following almost three years of decline. The rare earth neodymium-praseodymium (NdPr) oxide, used in electric motors, is up by almost 40 per cent, as is cobalt, a battery metal.

“You have an EV supercycle and you add a real commodity supercycle on top of that — it’s game on for the miners,” Simon Moores, managing director at Benchmark Mineral Intelligence, said. 

Commodities tied to petrol cars are also rallying. The price for palladium, a metal used in catalytic converters to filter exhaust gases, rose to a record above $3,000 an ounce on Friday, as Europe and China phase in stricter emissions standards.

That is likely to outweigh a slowdown in global internal-combustion engine car sales, according to analysts at Jefferies.

Oil prices have also been strong, recovering to pre-pandemic levels above $65 a barrel since the start of the year. Though demand is still depressed by limited international travel it has picked up as economies have reopened. Opec and allies like Russia are continuing to restrict supplies — only slowly adding barrels back to the market to bolster the price.

Goldman Sachs said this week that it expected to see oil prices hit $80 a barrel in the second half of this year, warning that there could be a large supply deficit this summer as vaccine rollouts accelerate and people drive to their holidays, boosting demand by more than 5 per cent globally.

Though the Opec+ group could restore production if prices go too high, some analysts are concerned by the longer-term supply outlook as energy majors pivot away from fossil fuels.

Christyan Malek, JPMorgan analyst, has argued that a serious supply gap could emerge in the next few years, with about a $600bn shortfall predicted in capital expenditure between now and 2030. There is a “risk of oil prices overshooting as non-Opec supply falls short,” Malek said.

How long the commodity frenzy will last, however, is up for debate. “This is a mini supercycle,” Alex Sanfeliu, the head of Cargill’s world trading group, said of the increase in agricultural commodities. “I don’t think it is going to last as long as the last one. Supply and demand react faster now.”

A Shekar at Olam International, a leading agricultural trader based in Singapore, said he did not see a continuous rise in food commodities. However, he predicted that underlying demand would remain strong in the next six to 12 months as consumers eat out following a year of lockdowns. “That may drive pricing further,” he said.

Some cast doubt on the notion that we are entering a supercycle at all. “We think the price rally is likely to continue for a bit, but this is more of a business cycle upswing rather than a supercycle,” said Jumana Saleheen, chief economist at CRU.