Beer, sun and chocolate

Those who have been frequenting Langue sauce piquante (or LSP) for a long time , before this blog made its debut in the (internet) pages of Le Monde , know that the women's section of LSP participates in the Commission for the Enrichment of the French Language, or CELF for short, an offshoot of the Ministry of Culture. "To avoid professionals in certain fields being forced to resort massively to the use of foreign terms that are not understandable by everyone (our emphasis) , the creation of French terms to name today's realities must be encouraged and facilitated: the production of terminology in French is therefore an imperative. This is why, for more than fifty years, the public authorities have encouraged the creation, dissemination and use of new French terms," ​​this is how this Commission defines its role.

The CELF meets monthly, examining vocabulary lists from a variety of fields: international relations, economics and finance, chemistry, IT, automotive, law, urban logistics, etc. And before each meeting, the General Delegation for the French Language and the Languages ​​of France sends the members of the Commission extensive (and fascinating) documentation on the occurrences of the terms that will be studied. At a recent meeting of the Commission, terms from economics and finance were examined, and the subject of "physical raw materials" was discussed.

A novice's question: is it possible for a raw material not to be physical? Answer: yes!, as one of the experts from the "economics and finance" college explained to us in more detail. (Colleges: this is the name given to the CELF expert groups responsible for proposing French equivalents for English terms.) So, yes: not only are there physical raw materials (wheat, oil, sugar cane, rubber, etc.) but also non-physical ones, and this is where our expert answers us:

"Companies are faced with the volatility of raw material prices and have long had hedging instruments offered by banks or financial markets. This allows them to protect themselves against unfavorable changes in the price of oil, gas, copper, cocoa, coffee, wheat, etc., just as they do with financial variables, interest rates, exchange rates, or stock market indices. A futures market has even been created for butter, which allows the food industry to protect itself against price volatility. But the increased volatility of climate indices – temperature, precipitation levels, wind speed, snow depth, etc. – has created a new risk for many companies whose results are greatly affected by the level of these variables. For example, one study showed that a variation of 1 degree Celsius in the summer in southern Europe led to a 7.5% variation in beer consumption, and two degrees Celsius, 15%. For brewers, temperature has become one of the primary risk factors, perhaps more so than euro-dollar volatility or interest rate volatility.

Without fearing the mix, let's leave beer for chocolate, still following our expert's explanations: the financial markets, taking into account this "new risk" that is the temperature level, have responded "by introducing hedging instruments relating to these new "raw materials", such as temperature. Thus, the chocolate manufacturer, whose demand is inversely correlated to the temperature in summer, can cover its budget by purchasing temperature forward, a new financial raw material. If, for example, it purchases the Paris temperature forward, expiring in August 2025 at 24 degrees and the actual temperature recorded at the end of August was 27 degrees, it will resell its contract, making a profit of 3 degrees Celsius, or 3 million euros if the contract provides for the valuation of one degree at 1 million euros. This gain will be supposed to compensate for the financial loss associated with the reduction in chocolate sales..."

Climate indices, we wouldn't think of them immediately, so it's a market, and to return to the chocolate manufacturer, "unlike "physical" commodity markets, delivery on time is obviously not possible... The chocolate manufacturer will not receive a temperature of 25 degrees! But he will resell his contract, realizing a profit supposed to compensate for his loss associated with the drop in sales."

Will you think about it when opening a bar of chocolate while sipping a beer under a blazing sun?