According to this Reuters article, the FAO report of record food prices that I wrote about yesterday is no big deal. The article notes that in Kenya the population has changed its diet from corn and wheat products to rice, potatoes, and amaranth. This was inevitable, and a phenomenon that I don't think western traders will understand. When I was in Brazil this past month I heard the same thing, locally grown cassava flour is being blended with bread products due to the high wheat price. Some African countries are now mandating a 10% cassava blend in bread.
The current food commodities bubble is able to account for some varying inventories reports, because there is always a short-term future fear to counter with, like this year's La Nina weather pattern. If production in the wheat market, for example, outstrips demand by 10-15% more than what is already priced into the desired trading range, because millions of people have shifted their diets since the last bubble, hold onto your hat.
Wheat plantings are up 10% in the US since last year. A 10-15% supply-demand difference could turn out to be extremely conservative. The USDA is likely selling its insurance at somewhere around the $7.50 per bushel range. This market has the potential to freefall by late summer, which would nearly bankrupt the crop insurance program.
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