Mother Nature: Even in modern commodities markets, the weather still has a big say in crop prices. The market got a not-so-gentle reminder of that last year when an Australian drought and other weather-related problems around the globe helped push wheat prices to new highs.
Outlook: Don't expect most agricultural commodities to come back to Earth anytime soon, as global demand for grains remains strong and new federal policy measures mandate more biofuel use. Newsom says corn futures could increase by as much as 25 percent by the end of 2008, and soybean prices could go up by slightly more than that. Wheat remains the wild card—if farmers can move past the weather-related problems that hobbled production in 2007, wheat prices could pull back, Newsom says.
But while individual crop prices may stray from projections, one thing appears certain: "The maintaining of historically high prices is most likely here for at least a few years," says Randy Mittelstaedt, the director of research at R.J. O'Brien, a commodities and futures brokerage firm. "Global demand is strong, U.S. demand is strong...and we are looking at just a huge increase in demand on the ethanol side."
