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Why Mortgage Rates Could Fall Because Of Midwestern Farmers

2008
07.01

As flood waters ran through Iowa and other Midwestern states, the nation’s corn supply was thought to be in danger.

Prices spiked in the wake of the floods, adding to the already-peaking grocery bills that many Americans are now bearing.

But yesterday, in a surprise report, the Agriculture Department said that many farmers had over-planted corn earlier in the season in order to cash in on corn’s rising market value.

The abundance of planting is offsetting a portion of the flood damage and this year’s harvest is now predicted to be the second highest on record.

For Americans in need of a home loan, this is terrific news because more corn supply means lower food prices and that puts a hold on at least one source of inflation.

Inflation is the enemy of mortgage rates.

The revised outlook for this year’s corn supply is now so much better than it was yesterday that the price of a corn bushel fell by 30 cents at the Chicago Board of Trade — the maximum allowable amount by rule.

Now, rapid movements in the price of corn may not seem relevant to everyday life, but even the smallest of details about the economy can trickle down and impact you as a homeowner.

The strength of the housing market may be correlated to consumer confidence and consumer confidence is definitely tied to the Cost of Living. And the same goes for the mortgage market — it’s all related to inflation.

With a surprise crop of extra corn, things may look just a little bit better.

Source
Corn Crop Largely Intact, Despite Floods
Scott Kilman
The Wall Street Journal, July 1, 2008

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