GLOBAL ECONOMICS AND POLITICS

Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.

 

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AGRICULTURAL PRICES AND INFLATION (“DESPERATE HOUSEWIVES”, EPISODE 8) © Leo Haviland, March 7, 2011

The supply/demand picture of agricultural playgrounds such as wheat, corn, soybeans, cotton, sugar, coffee, and cattle of course vary. Yet depending on the arenas and situation, fundamentals and price trends of a given agricultural commodity may substantially or increasingly intertwine with one or more other agricultural ones. The landscape of agriculture (though energy costs matter to it) is not typically viewed as the realm of energy. The fertile fields of so-called financial arenas like equities, interest rates, and currencies do not officially incorporate farming or energy. Nevertheless, agriculture is not an economic island entirely or even substantially separate from energy and financial provinces. Recent history underlines that the agriculture complex “in general” does not inevitably or always possess such independence. Not only traders in energy (and base and precious metals), but also foreign exchange, equity, and interest rate players, should monitor agricultural price levels and trends.

Governments and international organizations build numerous yardsticks to measure inflation. Not only do these indicators within a nation vary in the importance they assign to agricultural phenomena. Benchmarks between countries can differ, perhaps substantially. Picture a consumer price index of an advanced (industrialized; OECD) nation in contrast with one of a relatively poor developing country. Despite such variations, elevated and rising agricultural prices alongside similar patterns in the petroleum complex (and many metals) make it increasingly difficult for central bankers, finance ministers, and their political friends to claim that inflation levels will remain low. The withering of the United States dollar (broad, real trade-weighted basis; “TWD”) has assisted rallies in commodity prices.

The longer food- and other agricultural and energy prices- stay lofty, the more difficult it is to claim that so-called core inflation will remain (is) unaffected by them. Consequently, interest rate gatekeepers around the globe- even America’s stubborn Federal Reserve Board- face more and more pressure to boost policy rates.

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Agricultural Prices and Inflation (Desperate Housewives, Episode 8 )