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We used to have the agricultural complex whose demand was fairly predictable and so was supply except for unusual weather events which on a global average tended to be well average. We had the energy complex in which demand and supply were fairly predictable except when there were geo political events. However, the spill over from one market to another was limited. With the advent of bio-fuels we have now linked these two markets. Events in the energy market now spill over into the agricultural complex. Thus the threat to bomb Iran not only results in higher crude prices but also results in higher food prices. Rather than just hoard (or inventory if you prefer) crude speculators can hoard grains because the too can be converted into energy.
Last week the USDA announced that farmers were going to plant about a million more acres of corn- about 150Million bushels and corn prices fell 5%. Imagine the fall if over 2billion bushels were not being used. The drop would approximate the 75% quite closely.
