The US Department of Agriculture is projecting that at the end of the year, supplies of corn will only be 675 million bushels. That's 61 million bushels less than the consensus in the trade.
Eri Morita | Riser | Getty Images
Most of that corn is being sucked up by the ethanol industry, after record-high production in December and January.
If the forecast is right, it will leave America with the tightest corn supply in 15 years and a stocks-to-use ratio of five percent—meaning five percent of all corn consumed—which would be the lowest surplus level since 1996.
The Associated Press reports corn prices have already doubled in the last six months, rising from $3.50 a bushel to more than $7 a bushel.
The backdrop is of very strong gains on world markets overnight. Futures building on the previous session's 2 percent rally to a near a 30-month high.
Analysts are focused on concerns that the Chinese province of Shandong is experiencing what they describe as a "once in 200 year" drought.
China is the world's biggest producer of wheat. The concern is that world stockpiles will continue to tighten. "Food inflation is here to stay for some time," says Farha Aslam, head of food and agribusiness research at Stephens Inc.
If you want to play higher grain prices, there are the broad-based agricultural ETF and ETNs, such as Power Shares DBA or i-Path JJA. There are also two specifically targeting grain, commodities (corn, wheat and soybeans): i-Path JJG or GRU. Almost half of JJG is soybeans and oil, GRU is a purer play on wheat and corn.
For stock plays, Aslam is recommending Darling International or the Ohio Grain company Andersons, which was up almost 10 percent in the pre-market on what she describes as "blowout" earnings.