Why Investors Care Farm Prices Definition The Department of Agriculture releases the index of prices received by farmers at the end of the month for the current month. It reflects changes through the middle of the month. The index is not adjusted for seasonal variation. Farm prices are monitored by analysts to give early warnings of inflation or deflationary pressures in the economy. Farm prices are a leading indicator of food price changes in the producer and consumer price indices.
Inflation is a general increase in the prices of goods and services.
You might want to add in a few more percentage points for default risk and the opportunity cost, but the key variable in what interest rate you charge is the rate of inflation. That basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bonds and T-bills. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates accordingly. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion. By tracking the trends in inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform.