The reason grains increased as much as they have is the result of a perfect storm of events. It sort of began with the last few growing seasons of wheat on a worldwide basis. Wheat is the most used grain commodity on a worldwide basis whether it's food(pasta,bread), feed for livestock or byproducts. The 2006 and 2007 growing season seen droughts in Australia, India and other middle east countries. So worldwide supply of wheat fell to bad levels. Corn is the closest replacement for wheat so demand for corn took off so it could offset the wheat shortfall.
During all this we are looking for ways to offset crude demand so we aren't so reliant on countries who'd just as soon destroy us as to help us out. Ethanol was developed and up until 2001 we have never used more then 800 million bushels to make ethanol. The ethanol mandate comes in and we go from 800 million bushels in 2001 to needing 3.6 billion bushels to produce ethanol for the 2009 crop. Last crop year we produced right around 12.1 billion bushel nationally so roughly 25% of US production.
Then you have the stock market that has underperformed up until the last part of 2007(not to mention where we are at now) and fund managers are looking for a better return on their investment. Commodity funds become an option and all the sudden we have fund money(speculators) coming into commodities at record levels and off we fly. Meanwhile, areas such as India and China are becoming more industrialized and their demand for crude grows because they are driving many more vehicles. Then grain, which up until 2001 and before was being traded as a food product, becomes not only food but energy now because 25% of corn is being used for ethanol. Crude is a commodity also so the fund managers start throwing money into crude oil which makes crude take off to the record $147/barrel. This makes corn take off because of it's ties to energy and it peaks about the same time crude does at $7.36/bu on nearby contracts. This pulls soybeans higher also because of their tie with bio diesel as well as having to come up to compete for acres.
Part of it is also Cyclical because you can look at nearby charts and see years like this coming around about every 20 yrs.
Since July though, crude has plummeted down to the mid $30's per barrel, corn has come back to right now at $4 or under and soybeans are down below $10.
Sorry for the book, but you asked and I couldn't dissapoint.
