Jeff  Carter

The economy is definitely sputtering. Clearly, all the stimulus, cheap money and extraordinary market manipulation by the Federal Reserve and US Treasury haven’t worked. Heck, they even let banks lie about the rates they were exchanging money at and that didn’t work! With all the money that we have printed and spent, it’s amazing we are still in trouble.

But there is a new storm brewing. It’s in the grain market. If you haven’t been paying attention, corn prices($CORN), soybean prices($ZS_F) and wheat prices($ZW_F) have gone through the roof this summer. The existing supply of stored grain is at it’s lowest level since 1998. There isn’t enough supply to meet demand.

CORN Chart

CORN data by YCharts

Last year, Corn futures ($ZC_F) were trading at $5.872 a bushel. Back then we thought that price was a bit high. Today, that same bushel of corn is trading at $7.746 per bushel. A 32% increase in price!

The price of grain is important. Grain is an economic building block. Grain prices underpin quite a few different products in the economy. Grain is manufactured into sugars, additives, chemicals and drugs. It is feed for animals. Livestock manufacturer’s initially will pay a lower price as farmers cull their herds-but then look out when demand remains the same and supply is limited. In 2013, prices for protein could skyrocket. Not only that, but the fact that processors aren’t using “pink slime” anymore causes the demand to go up.

Jeff Carter

Jeffrey Carter is an independent speculator. He has been trading since 1988. His blog site, Points and Figures was named by Minyanville as one of The 20 Most Influential Blogs in Financial Media.