Last week, the U.S. Department of Agriculture pegged corn supply as of March 1 at 5.399 billion bushels, above the average analyst estimate of 5.013 billion bushels. The USDA also said farmers would plant the highest corn acreage since 1936. The nearby futures price of corn has tumbled to $6.41 per bushel from a recent high of $7.41. Wheat prices are also down sharply over this period.
Lower grain prices should keep a lid on food inflation, which is a positive development for consumers' purchasing power and should allow the Fed to maintain its ultra-easy monetary policy. Of course, the Fed tends to track inflation excluding food and energy. The Core Consumer Price index was up only 2% year-over-year during February. The personal consumption deflator rate was even lower at 1.3%.
Source: Ed Yardeni — Ed Yardeni is the president and chief investment strategist of Yardeni Research Inc., a provider of independent investment strategy and economics research for institutional investors.