Corn and soybean futures prices reached record highs this month, and wheat rose to its highest since 2008 as crop conditions worsened in the US grain-growing regions. Expectations that Fed Chairman Ben Bernanke might set the stage to announce QE3 in his Jackson Hole speech this coming Friday seemed to give grain prices a lift last week. His QE2 speech at Jackson Hole on August 27, 2010 boosted grain prices over the rest of that year through the first few months of 2011.
The risk for the economy and for the stock market is that higher food prices will reduce the purchasing power of consumers, which would depress the economy and corporate earnings. Over the rest of this year, higher grain prices should be offset by lower meat prices. The USDA estimated last week that the CPI food index will rise 2.5%-3.5%, and is likely to be higher next year when meat prices are expected to rise.
Today's Morning Briefing: Hot Spots. (1) Hot summer in a hot year. (2) The economy is not so hot, but not too cold. (3) USDA sees higher food prices in 2013. (4) CBO expecting QE3. (5) Cliff notes. (6) An election with two radically different agendas. (7) An expert says Romney has enough electoral votes to win. (8) ECB considering rate caps. (9) It’s always hot in the Middle East. (10) “Robot & Frank” (+). (More for subscribers.)