The latest culprit under surveillance for its role in driving up global grain prices is U.S.-grown corn.
Wheat was the star of last year's global food price run, set off by a drought in Russia that decimated a chunk of the country's crop and prompted officials to slam the borders shut to exports; prices shot up by 50 per cent; food riots broke out in Africa and the Middle East; and France, as leader of this year's G20 meetings, vowed to assemble agriculture ministers to tackle market volatility.
With two weeks to go before the ministers convene, markets are bracing for the release of an influential U.S. agriculture report on Thursday that is expected to shed light on the status of global food stocks and forecast supply and demand for the crucial growing months.
Analysts warn that if the outlook for U.S. corn, which feeds two-thirds of the global market, is anything less than glowing, traders' reaction to the report could tip off a new period of market volatility.
The explanation for this starts with unusually wet weather in the U.S. corn belt that forced long delays in planting this spring. Although prices dropped this week after a U.S. Department of Agriculture report outlined progress in the field - at least 94 per cent of the world's largest corn crop has been seeded -worries remain that the delays will translate into lower yields by the end of the season.
The timing is bad: Corn stocks this year have hovered around record lows, and demand for corn to make biofuels is keeping prices high. In April, the USDA said it expected corn stocks to shrink to 18 days' worth of supply, the tightest spot in more than a decade. The announcement came at a time of a global hunger for more market certainty after last year's frenzy.
"If we have problems with the corn crop … prices will go up. And that will spill over into wheat," said Philip Abbott, an agricultural economist at Indiana's Purdue University. "Wheat would not be as high as it is now were it not for the fact that corn is so high."
Making matters worse is a drought in Britain, Germany and France - Europe's largest wheat producers - that is threatening this year's crop. Although world wheat stocks are in good shape and global production is on pace for a slight increase, "another year of poor production in wheat would certainly be problematic," Mr. Abbott said.
Not everyone is convinced of the grim outlook. Errol Anderson, a grain and livestock analyst with ProMarket Wire in Calgary, believes corn and wheat are both hovering on the top end of their trading range now. Strong production forecasts for the year and predictions that crude oil prices will sink are bolstering his certainty.
"The world as we see it, because of the slowing economies, runs a risk of deflation by the end of the year," he said.
However, Mr. Anderson represents a minority. The United Nations' Food and Agriculture Organization said on Tuesday that high and volatile prices are likely to prevail for the rest of the year and into 2012 despite a modest price drop in May.
While high prices are tough to stomach, particularly among the least developed countries, increasing volatility in food commodities has proven tougher for them to withstand over the past year as global food prices reached highs not seen since the infamous shocks of 2008.
The prospect of dampening that volatility set off a world-wide discussion on what, if any, measures should be implemented. G20 agriculture ministers are expected to tackle the subject later this month. The most controversial possibilities include actions to rein in speculative trading in commodity markets and the possible creation of an international agricultural information system to increase transparency around global production, supply and demand.
"Countries have to go through that market and, on a given day, buy their grain," said Sophia Murphy, a B.C.-based senior adviser for the Institute for Agricultural Trade Policy. "There's a lot of things affecting the prices they have to pay ... and many of them have little to do with whether there's a real supply and demand issue," she said.
Ms. Murphy said she's encouraged by the prospect of the G20 discussions, but concerned that politics will get in the way of making a real dent in market volatility.
"If countries are being asked to rely on international markets for food security, they need to have some security that food is available," she said. "All the mechanisms coming out of the G20 are about money. That's all very well if there's something to buy. But you can't use money when the shelves are empty."
U.S. corn crop
Approximate acres worth of corn harvested in the United States last year, the largest portion of which was used in livestock feed.
Total value of the U.S. crop in 2010.
Percentage of the crop that is exported.
Tonnes of corn the United States placed on the export market in the 2009-2010 fiscal year.
Tonnes of corn produced for the foreign market by Argentina, the next-largest exporter, in the same year.
Tonnes of the grain bought by Japan, the world's largest importer.
Percentage of total corn grown in the world that U.S. production represents.
China, Brazil, Mexico
Other top producers.
More than 30
Percentage of the U.S. corn crop that is used for making ethanol.
Starch, cooking oil, flour, Bourbon whisky
Other products made with the grain.