Expect to hear lots about food prices and inflation as battle lines harden for November midterm elections. But is all the angst real? Or is it perhaps, as Macbeth says in Shakespeare’s famous tragedy, “A tale told by an idiot, full of sound and fury, signifying nothing?”
USDA’s latest Food Price Outlook provides support for both interpretations. Officially, the agency’s projections issued Sept. 25 call for food inflation to cool a bit in the coming year. But the statistics’ fine print shows a wide range of possible outcomes, from deflation — lower prices — to what amounts to hyperinflation that would make the 1970s and 1980s seem like a walk in the park.
The government incorporates trends from Consumer and Producer indexes to forecast food price levels, looking at both the average change expected and uncertainty over how widely these changes could vary. So, while farm-level soybeans could rise 12.4% in 2026, the increase could slow to 4% in 2027. But the range of next year’s soybean change could swing from 48.4% higher to 26.7% lower. That could be a jump ball for the bard — or a tale told by an idiot.
So it goes with the other food-related costs monitored by these outlooks. Net farm income tends to rise when beef, egg and poultry prices move higher and fall when fresh fruit and vegetables fall, reversing the trends with processed fruit and vegetables.
Corn and soybean prices also have different relationships with inflation. Year-to-year changes in soybean prices tend to move inversely to Consumer Price Index variations — when inflation is higher, soybean futures typically are lower, or even negative. But corn prices move in the same direction as food prices do. So, changes in corn prices tend to parallel food price fluctuations.
This doesn’t necessarily mean corn drives inflation, or that inflation moves corn. One variable doesn’t have to cause the other, as a statistical connection doesn’t automatically mean causation.
Crude is the culprit
One reason for this conundrum: Food is only one cause for overall prices to fluctuate. While food prices grab headlines, energy is the real culprit as 2026’s fourth quarter begins.
High diesel costs, for example, work into just about all commodities. Fertilizer is made from hydrocarbons, and for all the talk about field-to-fork, transporting products costs more, with everything from packaging to processing affected. Crude oil is off highs, with Permian prices flirting with $90 last week after retreating from triple digits.
While news out of the Mideast should continue to drive petroleum values directly, other headlines could compete for attention into the end of the quarter. A potential inflection point comes Friday, when the Labor Department is expected to report a stable unemployment rate and decent jobs growth in September, despite a few hiccups in the data. That could leave the Federal Reserve holding and hoping as it tries to navigate monetary policy.
Rising interest rates?
The central bank raised the target range for short-term interest rates by a quarter of 1% to 3.75% to 4% at its Sept. 16 meeting, double the 2% long-term goal. Forecasts from officials at the session suggested that standard may not be met until 2029.
Betting on Federal Funds futures showed the market firmly putting wagers on two more quarter-point hikes by the end of 2026, with at least one more bump likely in 2027 before the economy starts to cool.
A weakening jobs outlook could convince the Fed it’s time to begin easing credit sooner, which puts the upcoming Oct. 2 employment situation in play. Traders expect the report will show about 100,000 jobs added for September, with the unemployment rate steady at 4.1%.
Worries about jobs and inflation — the focus of the Fed’s dual mandate — caused markets of all stripes to gyrate last week, ahead of talks between presidents Donald Trump and Xi Jinping of China that failed to yield breakthrough headlines. The superpowers agreed to extend their trade truce for two more months, but no new terms for a deal on soybean purchases came down.
Supplies of both corn and soybeans look more than adequate as the 2025-26 marketing year winds down, which could keep the Sept. 30 Grain Stocks update from making much news, ahead of biofuel reports the following day.