Montreal, Canada

It’s almost impossible to peruse the financial press headlines these days without reading about food price inflation.

The United Nations Food & Agriculture Organization Index continues to hit new all-time highs each week since January and for the majority of frontier and emerging market populations, the cost of essential edibles is surging. The only daily staple that hasn’t skyrocketed is rice – which feeds more than 2 billion people every day. Rice harvests in Asia are plentiful, at least for now.

But it’s a different story altogether for other crops like corn, soybeans and wheat.

According to the United States Department of Agriculture’s (USDA) February 9 estimates, only corn is expected to garner a lower export commitment this year, down 2% versus 12 months ago. That number can change quickly, depending on this year’s harvest and the demand for ethanol.

Yet other crops are in the midst of strong export demand as a combination of severe droughts, export bans, government hoarding and poor harvests over the last year results in soaring demand for U.S. grains. The United States is the world’s largest exporter of corn and a leading exporter of soybeans and wheat.

The USDA forecast on February 9 projects wheat export commitments are running 55% above last year’s figures. The U.S. soybean oil crop commitment is 5% above last year’s number while soybeans are 10% above last year.

The grain sector is hugely overbought at these levels. But one dose of bad weather (e.g. drought) affecting important grain growing regions will throw another monkey wrench at the bears as the bull market in agriculture enters its third year in 2011.