In its continuing commitment to re-fire the nation's flagging economy, the Federal Reserve cut interest rates again this week. The 1/2 point cut was the 10th rollback this year. The so-called discount rate is now at its lowest level since 1961. The Fed's move comes ahead of the announcement of new numbers that show the economy is hardly overheating. The October producer inflation index fell 1.6 percent, the biggest one-month drop since the government began keeping such statistics in 1947. For the year, inflation at the producer level has fallen by 8-tenths of a percent.
While deflationary trends may be a bit of a shock to urban-based sectors of the economy, it is practically the norm in Rural America, where commodity production remains a core component of the economy. And better than expected crop yields are likely to keep any commodity-based inflation well in check.
Favorable weather is speeding the nation's grain and fiber harvests. At the start of an unseasonably mild week 81 % of the corn crop was in the bin. 90% of the soy harvest was completed and 71% of the cotton crop was headed to the gin.
The pick up of the harvest pace pressured markets. Market activity was also muted as much of the trade stayed on the sidelines prior to the Friday morning release of the USDA's monthly crop projections.
The government pegs the 2001 corn crop at 9.55 billion bushels, one percentage point higher than last month's guess. It projects 2.92 billion of soybeans will be produced, also a point higher than last month's guess. And the government estimates 20.2 million bales of cotton will be produced this year, one percent higher than last month's projection.
Responding to the report, grain and oilseed futures markets opened lower.