If food commodity buyers think things can not get any worse after US officials gave tight markets a further squeeze, they need to think again.
Certainly, the ream of fresh crop estimates that the US Department of Agriculture came out with on Wednesday contained an unexpectedly large dose of bad news for those hoping for a drop in farm commodity prices.
But that does not mean all the pain is out the way.
There are at least two factors which could turn the screw further on the world's crop supplies.
More weather
The first is the La Nina.
Sure, Argentina has seen some relief to the dryness being blamed on the disruptive weather phenomenon. But not enough to think that the USDA's cuts to its estimate for the country's corn and soybean crops are the last.
The weather pattern, which has a long list of South American droughts to its name, looks like hanging around a few more months yet.
Many local analysts have already downgraded their Argentine crop forecasts to levels well below those the USDA is factoring in.
And smaller Argentine crops mean even more pressure for America's strained supplies.
Urge to hoard
The second threat is more controllable but, alas, probably more dangerous. And that it is politics.
It is a natural reflex for governments to respond to food shortages by ramping up imports or closing down exports. And such action can, indeed, be justified at times.
But every tonne of crops stockpiled or hidden behind export barriers shrinks the pool available to buyers, besides blunting the incentive for domestic farmers to grow more.
It is the popularity of hoarding and export bans which may determine whether prices in the current rally reach the same levels as those in the last.
The 'where' factor
After all, supplies of many crops are not, on paper, too bad. Stocks of wheat, for instance, are hardly low on a global basis, and forecast by the USDA to end 2010-11 at 27% of use. That number fell below 20% before prices spiked last time.
Rice inventories are, at a forward 32% of consumption, historically high, and rising.
But the problem from a buyer's point of view is that so much is out of reach. China which effectively participates in raw materials markets only as a buyer, is expected to hold more than one-third of the globe's wheat stocks at the end of 2010-11, and nearly half of the globe's rice stocks.
And it is ultimately the "where" which matters more in crop pricing than the "how much".
In 2007-08, the rice price tripled despite supplies being their loosest for four years, and on track to relax still further, because a series of exporters from Burma to India to Vietnam banned shipments, despite healthy domestic supplies.
These curbs forced importers to chase prices higher to secure the limited supplies still available.
Export curbs
There are already signs of governments getting edgy again.
India, worried about food inflation, is wavering over allowing 500,000 tonnes of sugar exports and reportedly may exports of wheat products too. This at a time when its wheat inventories are, at 21.5m tonnes, way above a target of 8.5m tonnes.
Ukraine has kept tight caps on grain exports despite, at more than 40m tonnes, appearing to have more than enough for its own needs, of some 25m tonnes ?a decision questioned today by Eugene Leng, chief executive of farm operator Ukrzernoprom Agro.
Fortunately, from a consumer's perspective, there has been some relaxation in policies too, with Pakistan resuming wheat exports for the first time in three years.
For a guide on price movements, food markets should keep an eye on this balance, between the hoarders and the liberalisers, as well as on crop balance sheets.
