Oatly investors should be wary of climate change

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Oatly is going public, so out of benevolent interest, I picked them up registration statementDid you know: a risk factor for Oatly’s business? Climate change.

In 2010, the Securities and Exchange Commission issued guidance on the application of climate change disclosures, as may be required, among other things, in the section on risk factors. And according to the SEC, investor demand for climate change disclosures has “has grown dramatically.The SEC is considering whether existing disclosures are good enough, and it is requested feedback from the public

The registration of Oatly is a nice demonstration of that interest: the risks of climate change put down bluntly by a company.

“Our ability to ensure a continuous supply of high quality oats and other raw materials for our products at competitive prices depends on many factors beyond our control,” the materials said. Well, this is true for many types of agricultural products. There is some hugging about what can happen if a supplier goes bankrupt or whatever. Fine. Than:

In addition, the oats from which our products are sourced are vulnerable to adverse weather conditions and natural disasters, such as floods, drought, frost, earthquakes, hurricanes, plague and other shortages and diseases, which can adversely affect quantity and quality, leading to reduced oat yields and quality, which in turn can reduce or increase the price of our raw materials available. The monocultures we use are also susceptible to diseases, pests, insects and other external forces, which can have short-term effects, such as resulting in a poor crop in a year, or in the long term, which may require new oat varieties . grown.

This is the first time that I have seen “monocultures” being referred to in a regulatory file. It has been used three times, per SEC search‘Monoculture’, no plural, has been used about 80 timesIt is somewhat surprising to see this jargon – it refers to much of a single crop that is widely grown – in a registration statement!

If, like me, you come from a farmland, “monoculture” really just describes agriculture as you know it. The idea is that it will be more efficient, profitable and easier to manage, allowing farmers to specialize in a specific crop, such as oats. It also means more pesticides are used, and if pests develop, they can be wiped out more easily a shocking amount of plants

Monocultures to be a risk factor. Banana wilt, for example, is tied close to industrial banana production and the overwhelming number of Cavendish bananas being planted. Rotating crops however, can help prevent the bacterial disease. In oats, crown rust, stem rust, barley yellow dwarf virus, oat rust, and other diseases are seen in North America.

But this is not what made my jaw drop. Instead, it was:

There is also concern that carbon dioxide and other greenhouse gases in the atmosphere could negatively impact global temperatures, weather patterns and the frequency and severity of extreme weather events and natural disasters. If such climate change has a negative effect on agricultural productivity, we may experience reduced availability or less favorable prices for oats and other raw materials needed for our products. Climate change may also expose us to reduced water availability, water quality or less favorable water pricing, which can negatively impact our production and distribution activities.

North Dakota, Wisconsin, South Dakota, Minnesota and Iowa are among the best American oat producers – so events like the August 2020 derecho can screw up your oat milk. It destroyed 850,000 hectares of crops only in Iowa. Derechoes are fairly common in the plains, but the August 2020 one was remarkable for its size and destructionIt’s possible that climate change makes such storms more likely – one scientist told The Des Moines Register that “I am strongly convinced that in 10 years’ time, at least 20 and certainly 50, we will look back and say: ‘Wow, 2020 was a crazy year, but I miss it.’ ‘

Have fun investing!