Another point, which I addressed in an earlier diary (http://www.dailykos.com/story/2008/4/11/102334/169/74/493181), it fingered commodities brokers, worldwide, who, in the light of the falling US dollar, hedged themselves against it by panic buying hence larger hoards. So perhaps that's what Krugman alluded to though, like you, I fail to see the logic in that approach.
There was a 200 million ton increase in coarse grain production in 2007 compared to 2006. In fact it was a record harvest. It was mis-managed. Removal of grains (zea mays, mostly) from food to fuel production being one outstanding idiocy.
OTOH, I'm not so sure that the bumper harvest numbers reported are accurate, it may carry a degree of exaggeration. I'm looking into it, awaiting China's figures.
SHANGHAI (Interfax-China) -- An outbreak of sharp eyespot disease (SED), which affects cereals, is threatening 72.46 million mu (4.83 million hectares) of wheat in China's major producing regions, according to local agricultural authorities.
SED might erode the wheat output by 10% to 20%, while a more serious epidemic could cut output by as much as 50%, officials from the Henan Oil and Grain Product Quality Inspection Center told Interfax. "As it is still the early growth stage for wheat, the impact on output might be reduced, although wheat quality may be downgraded," an official from the center said.
Huang Junfei, a senior commodity analyst with Changjiang Futures, believes SED may well erode wheat output by around 5% on the 4.8 million affected hectares. As there are still a few months before the harvest, good farm work may be able to make up the losses.
What with African stem rust running amok in Africa and the Middle East ...
A fertilizer shortage in the wheat belt of the US ...
A drought in Australia ...
Things be getting down right interesting.
Maybe we should start a $25/bushel countdown series?
