Inflation Give Little Hope For Relief
CHRISTINE ROMANS, CNN HOST, YOUR MONEY: Welcome to YOUR MONEY where we look at the news of the week and how it affects your bottom line. I'm Christine Romans.</s>ALI VELSHI, CNN HOST, YOUR MONEY: I'm Ali Velshi. Coming up on today's programs on the rise, prices climb on everything from cereal to home heating oil. Find out if there is any relief in sight.</s>ROMANS: Plus, to drill or not to drill? The debate only intensifies. We're going to tell you why offshore drilling is such a hot topic on and off Capitol Hill.</s>VELSHI: And a new report says China will overtake the U.S. as the world's top manufacturer in less than ten years. We're going to find out what that means for your jobs and your shopping habits.</s>ROMANS: But first, a government report out this week. The consumer price index shows consumer prices rose last month at the fastest pace in 17 years. Take a look at this, prices have skyrocketed. Gasoline is up nearly 38 percent in the past year. Fuel used for home heating is up 61 percent and food prices are up more than 8 percent. The government also reports core inflation every month. That number which came in much lower than the CPI figure it strips out energy and food. But we know that you can't live without energy and food, so these inflation numbers overall really are a cause for concern, Ali.</s>VELSHI: Also making headlines this week Christine, expected bumper crop of corn. According to a report from the U.S. Department of Agriculture, farmers are on pace to harvest the second largest corn crop in U.S. history. Now that is after all the devastating flooding we saw in the Midwest in June. But don't get too excited. A bigger corn harvest doesn't necessarily mean lower prices at the supermarket. Here to explain is Tom Jackson. He's an agricultural economist at Global Insight. Tom good to talk to you. We heard about a good corn crop, quite possibly a good soy bean crop or at least better than expected because soybeans were damaged more than corn was in the flooding. Why then should that not relate to lower prices for the food we pay?</s>TOM JACKSON, AGRICULTURAL ECONOMIST, GLOBAL INSIGHT: I would argue really that the food price inflation that we've seen really hasn't fully incorporated the rising commodity prices. There's still just so much demand for corn out there. The corn prices are staying high and especially for livestock producers. They're still just having trouble keeping up with these high corn prices.</s>VELSHI: You know, we're looking at inflation year over year at 5.6 percent, the fastest pace in about 17 years. We know that gas prices are starting to moderate. We don't know how long oil will stay at these slightly lower levels. We're still talking $115 a barrel approximately. People are thinking that will give them a bit of a break. It was a combination of energy prices and rising commodity prices, though, that have contributed to the inflation that we face right now, isn't it?</s>JACKSON: Yes, it is. Certainly moderating or at least flattening out of energy prices will help. But, again, we still haven't fully seen the impacts of the energy prices factor through to the retail food prices, believe it or not. So it's still going to get worse before it gets better.</s>VELSHI: Tom, tell me how this works, because a lot of people look at corn prices and soybeans and say, don't eat much soybeans and I suppose corn gets into corn flakes and a bunch of other things. Both corn and soybeans work their way well into our food system more than we know.</s>JACKSON: That's especially true in the livestock sector. You can basically consider that as processing of corn and of soybean meal, a big product of soybeans. And, again, livestock production, producers just can't -- they're losing money. They've been kind of hanging on really producing more than you might expect, given the run-up in feed prices. But they're still -- they're going to -- some of them are going to give up here pretty soon on waiting for lower corn and soybean meal prices, which are going to translate into lower meat, milk production, egg production, all that.</s>VELSHI: Now we saw in 2007 we saw a rate of increase in the price of agriculture that was about double the long-term average. There's some speculation that increased rate will continue for some years to come. Do you still think that's the case or have you thought that's the case?</s>JACKSON: It's very likely. I mean, the problem is, you know, demand has just grown so much. And one thing we need to mention is the weaker dollar, I think, this has boosted agricultural exports from the U.S., a lot more than we were figuring on, especially as some of these biofuel policies were put into place. And really production, in the long term, I never bet against U.S. agriculture's ability to overproduce in the long run. But, you know, those gains still come fairly gradually, especially from the levels that we're already seeing.</s>VELSHI: OK. Bottom line, though, if you were looking at commodity prices, seeing them off record levels, don't get too excited about getting a discount on the things that you buy and the things that we eat?</s>JACKSON: Absolutely.</s>VELSHI: Tom Jackson from Global Insight, good to talk to you again, thank you.</s>JACKSON: Thank you.</s>ROMANS: All right. Coming up next, think the Russia/Georgia conflict is happening a world away? Not when it comes to your money. We will tell you why. And later we will hop aboard the CNN Election Express and find out which money matters will be driving voters to the polls this November.