The nation's economy is still mending, slowly. Retail sales have risen, modestly. Consumer confidence is higher, but, unemployment numbers still indicate companies are not expanding workforces. Wall Street seems more confident. The Dow and other indices broke through their highest level in a year before retreating on Friday. Part of the reason for optimism is the assurance from the Federal Reserve that it is ready to cut interest rates again to spur the economy.
But, what if the lower rates don't produce more economic activity? Wholesale inflation fell again last month, raising concerns about deflation. The investment community is keenly aware that Japan has had rock bottom rates for the past decade and its economy remains anemic. In a global economy the effects of deflation can move as rapidly as a virus. No one understands the deflation better than those invested in American agriculture. The concern was embedded in analysis of this week's government crop projections.
The USDA predicts farmers will produce a record ten billion bushel corn crop. But, exports are projected to remain at 1.9 billion bushels.
The U.S. winter wheat harvest is just underway and the government anticipates higher production – 2.18 billion bushels. But flat domestic demand has allowed stockpiles to rise. The ample supply has contained higher price movement that might have been provoked by the news that wheat producing nations of Eastern Europe, Ukraine, Australia, India and will produce less this year.
The government expects U.S. soybean production to fall 6 percent this year to 74 million metric tons. The government also is projecting the Brazilian harvest will produce a record 52 million metric tons and dampen world demand for American soy.