With May data complete, the Guild Basic Needs Index (GBNI), our proprietary real-world inflation gauge measuring the price of a basket of four essential consumer goods, has backed slightly off April’s 25% year-over-year pace. (You can click here for a more detailed description of how we compile this measure of the real inflation experienced by consumers.)
Food comprises 30% of the GBNI. Corn, wheat, and soybean prices have recently corrected sharply. However, consider the following map of U.S. drought conditions over the past 30 days; much of the U.S. agricultural heartland (for example, 40% of Iowa) is in a condition of severe drought. Near-term price volatility for food grains can be significant, and driven by a host of extremely complex factors (including speculative activity and weather forecasts for the world’s large growing regions), but at this time of the year, weather conditions are often critical. Continued drought conditions in the U.S. could result in food price increases later in 2021.
