Is Global Volatility Good?
Last week I argued that cost of capital is the master key for any innovative heavy-asset play in the climate sector: lower the blended rate, stretch the tenor, right-size the check, and suddenly projects that once looked marginal lock in double-digit returns. Hold that thought while we widen the lens to the problem those assets are meant to solve: poly-sector volatility.
January gave us a perfect snapshot. Arabica futures on the ICE exchange blew past $3.70 a pound, the highest level on record, after drought hammered Brazil’s crop and tariff threats rattled trade with Colombia. Three days ago a national survey of U.S. business owners put tariffs, severe weather, and cyberattacks at the top of their worry list; ninety percent fear supply-chain disruption in the next twelve months. Inflation, currency swings, political flashpoints, and labor shortages stack on top of each other. The result is not volatility in one corner of the market; it is simultaneous shock across energy, commodities, logistics, finance, and labor.
Large companies do not sit still under that kind of stress. Finance teams buy insurance, load up on currency hedges, and layer price-adjustment clauses into every contract. Operations teams shorten the chain. Nearshoring and reshoring, once niche arguments about patriotism or brand, are now core risk controls. KPMG calls it “strategic shoring,” a move that cuts exposure to geopolitical swings and slashes transit time Inbound Logistics sees the same pattern: more U.S. firms are shifting production closer to home, not for headline cost but for resilience. Legal briefs and tariff trackers echo the trend: resilience is edging out unit-cost as the primary procurement metric.
As volatility climbs, buyers start valuing certainty over the last cent of margin. Airlines are already locking multi-year deals for sustainable aviation fuel even though it costs more than kerosene, because guaranteed volume beats spot-market chaos. Food retailers and hospitality groups are moving the same way. Long-term contracts convert operational stability into a financeable asset, and that asset can be levered.
Enter Planet Farms. Early vertical-farm pioneers raised billions in VC dollars in the heady days of zero-rate money. But that money came with the VC scaling curves and they face-planted on capex bloat and labor cost, but the thesis was never wrong, only premature. Today AI models entire growth cycles, robotics and automation, thin production labor exposure, and renewable microgrids riding the cost curve down are turning electricity from a constraint into a competitive edge. Local plant factories can ship basil, lettuce, even strawberries within hours of harvest. They delete drought risk, tariff risk, and migrant-labor politics in one engineered stroke, and they do it inside metropolitan food deserts that field agriculture cannot reach.
Here is where the capital math snaps back into frame. A supermarket willing to commit to a ten-year offtake for guaranteed quality and volume gives Planet Farms the revenue certainty that banks crave. That certainty drives down a lender’s probability-of-default model, which tightens the spread, which drops the weighted average cost of capital. Cheaper capital unlocks larger, purpose-built factories instead of retrofit warehouses which are more efficient from CAPEX and OPEX, and bigger checks mean longer tenor in the debt stack. Longer tenor further reduces annual cash stress, letting the operator reinvest in more automation and bigger facilities. Each turn of the flywheel cuts unit volatility and finances the next cut.
Poly-sector volatility, therefore, is not just a risk to be managed; it is a market signal that rewards whoever can strip that risk out of the system. The demand for volatility hedges makes resilient operators like Planet Farms more valuable. Their customers sign longer contracts at richer margins, lenders price debt off those contracts, and investors write larger checks into lower-beta cash flows. Policy shifts, from new tariffs to cross border carbon taxes, only intensify the cycle by nudging more buyers toward guaranteed supply.
The conclusion writes itself. A world with rising, interlocking shocks pushes corporations to pay for certainty, and certainty is exactly what engineered, AI-driven, near-market production assets deliver. The stronger the demand for volatility hedges, the lower the cost of capital for the builders of those assets, and the faster we scale the infrastructure that keeps food, fuel, and materials flowing when the next shock hits.
Volatility is climbing, but so are our tools; if we marry the right capital to smart industrial processes we can swap chaos for a demand-driven, low-carbon industrial engine and hand our kids a planet that might not suck (or maybe I’m just an eternal optimist).
