HARI SREENIVASAN: Wall Street staged a major rally today, triggered by the head of the European Central Bank. He pledged to do whatever it takes to keep the euro monetary union intact, including steps to help hard-pressed Italy and Spain. The Dow Jones industrial average responded with a gain of nearly 212 points to close near 12,888. The Nasdaq rose 39 points to close at 2,893.
The drought in the U.S. midsection is rapidly getting worse. A weekly government report today said more than 20 percent of the nation's land mass is now in extreme or exceptional drought. Separately, the Agriculture Department said Wednesday the drought will drive up food prices this year and next.
For more on the food forecast, I spoke earlier with Richard Volpe, a research economist with the Ag Department.
Richard Volpe, thanks for joining us.
RICHARD VOLPE, Department of Agriculture: Of course.
HARI SREENIVASAN: All right, so, help put this in perspective. How significant of a jump in prices is there going to be at the supermarket next year?
RICHARD VOLPE: Well, the first thing that I need to stress is that this jump which we're expecting as a result of the ongoing drought in the Midwest is mostly going to occur in 2013.
So it's in 2013 where we now expect retail food prices or grocery store prices to go up 3 percent to 4 percent. Now, the historical norm for the last 20 or so years going back to 1980 is for grocery prices to go up about 2.8 percent or 2.9 percent year over year. So that's the -- what we expect to happen every year.
If our outlook for 2013 is 3 percent to 4 percent, that is, of course, above normal, but to put it in perspective, we saw grocery prices go up 4.8 percent in 2011, so we're looking at something less than 2011. And of course if we go back to the last time that food prices really jumped up, '07 and '08, that's where we saw back-to-back jumps of about 4 percent and then about 6 percent. So are we looking at an increase? Yes, but we have seen bigger jumps in recent history.
HARI SREENIVASAN: And help connect the dots for people on why it is that the drought in one region and corn prices going up are so important to the entire food system?
RICHARD VOLPE: Corn is the single biggest commodity grown in the U.S. and it's the single most important commodity for producing retail food.
It's a component of about 75 percent either directly or indirectly of the foods that you can buy in the supermarket. But the number one most important way that corn prices are going to affect consumers is that higher corn prices leads to higher feed prices, which in turn leads to higher animal products and higher prices for the products that come from animals.
So the animal prices are going up, as well as things like milk and eggs and those products that come from animals. So we definitely expect to see impacts starting at the tail end of this year and into 2013 for all animal-based products, beef, pork, poultry, dairy, eggs. That's where we will see the biggest impacts.
HARI SREENIVASAN: All right, Richard Volpe, research economist at the USDA, thanks so much for your time.
RICHARD VOLPE: Sure.
HARI SREENIVASAN: Ford has announced it's recalling nearly 485,000 of its older Escape SUVs. Their throttles can stick, causing unexpected acceleration. The warning affects models from 2001 to 2004. Most were sold in the U.S. Just last week, the automaker recalled 11,500 of its new 2013 Escapes for fuel lines that can crack and start fires.
Investigators in the Colorado shootings worked today on a package sent to the University of Colorado, Denver. The alleged gunman, James Holmes, had been a grad student there.
Unconfirmed reports said the package held a notebook describing the impending attack.
Meanwhile, more than 1,200 mourners filled a Denver church for the second funeral since Friday's mass shooting in Aurora, Colorado.
And in Washington, the U.S. House adopted a resolution honoring the victims and first-responders.
REP. CORY GARDNER (R-Colo.): As a father, I can't imagine the great loss of families, of friends, the victims of this horrendous crime. And our hearts, our prayers, our thoughts go with them as we build a stronger community going forward.
REP. DIANA DEGETTE (D-Colo.): We can mourn for the victims, which is appropriate this week. But it is our challenge as leaders of our state and leaders of our country to go on from today and to say, what can we seriously do as a nation to make sure that no tragedy of this scope or horror ever happens in this country again?
HARI SREENIVASAN: In a speech last night, President Obama said he'd support stepped-up background checks to bar criminals and the mentally ill from buying weapons. But Republican Mitt Romney told NBC News that changing the existing laws wouldn't prevent such tragedies.
In Iraq today, clashes intensified between security forces and militants in the northeast in a possible al-Qaida bid to regain lost ground. Gun battles have raged for two days around the town of Hadid, north of Baquba. So far, at least 19 people have died. During the day's fighting, an Iraqi army helicopter came under attack and had to make an emergency landing.
A scandal that's roiled the top ranks of China's Communist Party took a new turn today. Gu Kailai, the wife of an ousted member of the ruling Politburo, was charged with murdering a British businessman. The announcement on state TV said she allegedly killed the victim at a hotel in Chongqing last November.
ZHANG YU, CCTV (through translator): According to Xinhua, the state news agency's release, the investigation results show that Gu Kailai and her son had conflicts with British citizen Neil Heywood over economic interests. Gu Kailai poisoned Neil Heywood to death in the consideration that Heywood posed a threat to her son's security.
HARI SREENIVASAN: The report didn't mention Gu's husband, Bo Xilai. He was stripped of his Communist Party posts for unspecified discipline violations last April. He remains under investigation by party officials.
Those are some of the day's major stories.