This theme explores the rapidly changing and shifting status of skyrocketing agricultural commodity prices and dramatic increases in family food expenditures in an effort to provide some insight as to cause and effect. The authors point out the complexity of a situation that involves many factors ranging from weather to international trade and commodity supplies.

The boom in farm commodity prices cannot be explained by any single factor. Weather–related production declines may prove temporary. The rapid growth in biofuel production is one of many reasons for the strong growth in global demand for farm commodities. Some of these demand shifts may persist for years to come.

In spite of media reports to the contrary, the higher corn prices have not impacted the retail price of meat and milk - yet. Through mid-2008 supplies of beef, pork, poultry and milk are all higher than they were a year earlier and producers are absorbing the loss from higher feed costs. However, herd and flock liquidation has begun and supplies of animal products will be lower and prices higher later this year.

Since March 2006, there has been at times a notable lack of convergence between futures prices and cash prices at delivery locations for CBOT corn, soybeans and wheat futures contracts. The increased uncertainty in basis behavior has potentially far-reaching implications for hedging use of these markets.

In March 2008, many grain merchants limited their offering of forward contracts to farmers. The loss of this risk management tool comes at a time when producer demand for forward contracts is strong. This article explores options available to producers.