The recent decline in commodity prices has provided a rare respite for central banks trying to rein in high inflation. But are the energy and food crises afflicting the world actually easing?
In the latest episode of Exchanges at Goldman Sachs, which is based on Goldman Sachs Research’s latest Top of Mind report, host and author of the report Allison Nathan speaks with experts from the food and energy markets.
| Goldman Sachs’ commodity bull Jeff Currie, global head of commodities research, is resolute that the decline in commodity prices is temporary. “In October of 2020, we started arguing that we were entering a commodity supercycle similar to what we saw in the 1970s and in the 2000s driven by structural underinvestment in pretty much everything in the old economy,” he says.
Economist and investor Gary Shilling, president of A. Gary Shilling & Co., Inc., however, rejects the idea of there being a commodity supercycle, and sees the run-up as mostly a speculative binge with room to unwind. “If you look at commodities, and I’m looking at the broad CRB index, it has, corrected for inflation, declined 83% since the mid-1800s…I think the idea of shortages of commodities, boy, you’re swimming upstream if you want to say that…human ingenuity beats shortages any day,” he says. Meanwhile, Chris Barrett, International Professor of Agriculture at Cornell University, sees only one long-term solution to the global food crisis. “If the war [in Ukraine] ended tomorrow, the fundamental problems of global agrifood systems are not going away,” Barrett says. “They existed before the war, they’ll continue after the war ends. And the only way to address them is through major technological and institutional innovations that help us to produce more food on less land and with less water.” Finally, Nathan speaks to Meghan O’Sullivan, professor at Harvard University, who sees disruption ahead as the world grapples with two crises at the same time: the energy crisis and the climate crisis. “We often think about the energy transition as subbing out one form of energy for another form of energy. But the reality is that we’re really talking about remaking the entire global energy system…We should expect that there’s going to be a lot of geopolitical tumult that comes as a result of trying to change that energy system so dramatically in such a short time scale,” she says. |
