FORTUNE – Commodities are falling fast on worries that China's economy is slowing and that the economic recovery in parts of Europe and elsewhere has stalled. Copper has sunk to a three-year low, falling below $7,000 a ton in April. For the first time since last July, Brent crude oil fell below $100 a barrel as demand for fuel weakened across slower-growing economies. And after record highs last summer as America's heartland suffered one of the worst droughts in decades, corn prices have plunged as farmers set about to plant one of their biggest harvests in years.
Traders betting that commodities would rise might be hurting today, but the decline in prices could bring relief to America's consumers. And while the fall in gold prices signals many economies could be in trouble, it may very well be something to celebrate.
Here are three reasons the average consumer should cheer falling commodities:
Bigger retail sales
Lower gasoline prices may be signaling slower growth throughout the world's major economies, but they have also left U.S. consumers with some extra spending money.
What they aren't spending to refuel their cars, they're spending on everything from electronics to clothes. In April, retail sales unexpectedly edged up 0.1% after a 0.5% decline in March.
Declining gasoline prices, which fell 14 cents in April, have helped offset some of the drag from higher taxes that kicked in January. Receipts at clothing stores recorded their biggest increase since February last year. Consumers also spent more at restaurants and bars.
Nationwide, gasoline prices are expected to fall through summer -- the result of a spike in crude oil production. A gallon of regular gas will cost about $3.50 this summer, down more than 10 cents from last year, according to the U.S. Energy Department.
Investors typically see gold as a hedge against rapidly rising prices. But with global inflation falling, gold prices have tumbled -- officially entering a bear market last month.
U.S. stockholders have gained as prices for the yellow metal decline. To be sure, only about half of Americans own any stock, but those who have money invested are benefetting in big ways. The S&P 500 (SPX) is up 16% so far this year and has continued to soar to new highs. With U.S. inflation lower than the Fed's target of 2%, stocks may rise further as it's less likely the central bank will end its large-scale bond purchasing plans any time soon.
Lower grocery bills
The decline in corn, soybean, and wheat prices may have left some traders scrambling, but it should bring good news to shoppers in U.S. grocery stores.
Farmers this year are expected to harvest record crops, after recovering from the worst drought to ravage the industry in decades. With bigger supplies, corn prices are forecast to average $4.80 per bushel, down a third from the previous year's average, according to the U.S. Department of Agriculture. Corn prices are closely tied to supermarket prices, since it's a key ingredient in many foods and used as feed for livestock. Soybeans are expected to average $10.50 a bushel, down 27%; wheat is forecast to decline by 11% to $7 a bushel.
To be sure, we won't likely see a drop in grocery prices this year, but the increases will be smaller compared to levels reached in 2008 and 2011. Food prices will increase between 3% to 4% in 2013, as higher feed prices from the drought continue working through animal-based food products. That's slower than the 6% rise in 2011 and the 8%-9% jump in 2011. Hopefully by 2014, we'll reap the real benefits of this year's drop in corn and wheat prices.
Some economists are worried that farmland prices are nearing bubble territory. How bad can it be if no one's heard of it?
FORTUNE – Following the collapse of U.S. home prices in 2007, analysts and economists have been eager to spot the next big bubble. There's been talk of a bond bubble. And as U.S. stocks hover near a five-year high, many have wondered if a bubble is in the works. MORENin-Hai Tseng, Writer - May 10, 2013 5:00 AM ET
Demand for corn ethanol is raising food prices. What's needed is a policy change.
FORTUNE -- After 30 years of government largesse that would have made even Nancy Pelosi blush, Congress in December let expire the roughly $6 billion annual subsidy for corn ethanol. That's bad news for the big refiners that were paid 45¢ for each gallon of corn ethanol they blended into gasoline supplies. But it's good news for MOREScott Cendrowski, writer - Jan 31, 2012 5:00 AM ET
Corn prices are popping again, but there is a morsel of good news too for those who fear corn flakes inflation.
Corn futures surged 3% in trading Thursday after the government slashed its corn planting forecast and raised its price projection. The Agriculture Department now expects corn to fetch a record $6 to $7 a bushel this year, which is 50 cents above its previous forecast.
The latest spike shows "the balance sheet MOREColin Barr - Jun 9, 2011 12:06 PM ET
The effects of this year's commodity spike should be behind us by this summer.
It seems early yet to say so. Consumer price inflation rose for the fifth straight month, the government said Friday. Prices were 3.2% higher than a year ago in April, led a 33% surge in the gasoline price index.
But with economic data weakening in recent weeks and the Federal Reserve preparing to end the bond-buying program that set MOREColin Barr - May 13, 2011 9:51 AM ET
A big oil spike is taking the starch out of corn.
Agricultural commodities such as corn, wheat and soybeans plunged Tuesday as a surge in oil prices sent traders scurrying for the safety of precious metals and government bonds.
With oil futures surging 7% in New York trading to $98, riskier assets took a beating. Stocks dropped almost 2%, while the price of copper slid almost 3% and some of the food MOREColin Barr - Feb 22, 2011 1:23 PM ET
The rise in food prices since last June has shoved 44 million people into dire poverty, the World Bank says in its latest report on the global food crisis.
The antipoverty organization says in February's Food Price Watch that its price index rose 15% between last October and last month, leaving it just 3% shy of its 2008 peak. The biggest gains have come in wheat, corn, sugar, fats and oils. MOREColin Barr - Feb 16, 2011 6:31 AM ET
Cattle prices are on the hoof lately. But don't just blame Ben Bernanke.
There are plenty of other places to point the finger if you want to assess responsibility for record livestock prices. You can start with wrongheaded U.S. energy policy, tightfisted herders and soaring food demand.
Like so many other commodity markets, cattle have been in full trot since the Federal Reserve said in November it would loosen the money supply to keep MOREColin Barr - Feb 2, 2011 6:40 AM ET
Corn is popping again, thanks to the latest report of dwindling grain supplies.
Corn futures rose 3% Wednesday after the U.S. Agriculture Department predicted corn stocks would fall to their lowest level since 1996.
The report is the latest sign of stretched food supplies at a time when developing country economic growth is fueling seemingly insatiable demand for agricultural goods. The United Nations warned last week of possible food riots as its MOREColin Barr - Jan 12, 2011 10:19 AM ET
The government cleared the use of ethanol-rich gasoline in late-model cars and trucks.
The Environmental Protection Agency approved the sale of so-called E15 fuel – comprising 85% gasoline and 15% ethanol, which is made in this country largely from corn – for use in cars and trucks made since the 2007 model year.
The EPA said the decision clears the first step toward full-scale commercialization of E15 blends. Until now, ethanol MOREColin Barr - Oct 13, 2010 1:51 PM ET
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