Grain inventory cushion hits acreage wall

Whichever way you look the evidence is clear - the grain inventory cushion is dangerously low.

The USDA runs its spotlight over the world's fields and grain silos and finds the same trend in all the major grain producing nations, depleted inventory and farmers unable to match demand. Some of the analysts that spoke to Bloomberg after the USDA data was released seemed to think increased planting by farmers could rebuild the cushion to some degree over the next two years, if the weather holds.

Others were more pessimistic. For example, Iowa farmer Terry Jones told Bloomberg that even a corn crop of 92 million acres in the US would not be enough to rebuild inventories because stocks are forecast to fall to 18 days of use. The pattern repeats across all countries and all food commodities. Demand is outstripping supply and the response on the supply side is limited by the time it takes to increase plantings and grow more crops, and critically by the "acreage wall" cited by Dan Basse, the president of AgResource Co, Chicago.

Surging commodity prices are making markets bullish on agriculture, amplifying price rises temporarily, but the underlying mega-trend seems more permanent.