Here it is in a nutshell: Prices of grains and cotton have skyrocketed year to date. The United States Department of Agriculture's (USDA) report released Thursday stated that corn and wheat prices have doubled in the past year. Soybeans were up 50% and cotton was up 155%, as reported in the Wall Street Journal.

What has caused these sharp increases? The key mover has been exports. China, India and countries in the Mideast are stockpiling grains over fears that they will not have enough to feed their people. Corn in storage fell 15% on March 1. Corn has been hit doubly hard because 40% of it is used for ethanol production and a large amount goes for livestock feed.

The markets were full of contradictions last week. Take for example the turmoil in the Middle East. In past crises, investors flocked to the U.S. dollar. But not this time. The U.S. dollar futures contract fell to 76.41 last week.

Another contradiction: the U.S. jobs report was the best in two years, with 192,000 new jobs added. The stock market should have rallied strongly. Instead the Dow fell 88 points. The crises in Libya and elsewhere overshadowed the favorable jobs picture.

Amid the political and social uprisings in the Middle East, and union protests in the U.S., a recent speech by a pivotal U.S. policy maker received little attention, but it's one that investors should review.

In a speech before the recent G-20 meeting, U.S. Federal Reserve Chairman Ben Bernanke urged emerging market nations to address the flood of money streaming into their markets.

March corn futures jumped 24.25 cents a bushel on Wednesday to $6.98. Corn contracts have risen 97% since June. You may be wondering why all this activity in the corn market in the middle of winter. The answer lies in a USDA report that said corn supplies are dangerously low. In fact, they are near the record low set 15 years ago.

What that means is that the corn stocks we have must last until our harvest starts in mid summer. Of the 12.4 billion bushels harvested last fall, we will have only 675 million bushels by Aug 31.To add more fuel to the problem, this new report is 9% lower than the USDA"s January projection, as reported in the Wall Street Journal (subscription required).

Two mega trends are converging on the grain markets. One has been poor growing weather, and the other is increased demand for food throughout the developing world. The combination of these two factors are driving grain prices higher and higher.

On Wednesday, the United Nations' Food and Agriculture Organization (FAO) issued a notice that severe drought in China's main winter wheat region could pose a serious threat to output, as reported in the Wall Street Journal. Some 5.2 million hectares out of the total of about 14 million hectares could be under threat from poor rainfall and low snow cover.

In projecting U.S. GDP growth at about a 2% rate for the remainder of this year and in 2011, I have noted that the two propellants of growth so far in this economic recovery -- the inventory revival and fiscal stimuli -- are largely exhausted.

But are there other sectors of the economy that might serve as the backbone of any meaningful economic recovery? I don't see any, especially with U.S. consumers continuing their saving spree, repaying debts and remaining hesitant to spend like they did during the boom times of earlier years.

If you had to pick a commodity market dominated by rumors, it would have to be sugar. On Nov. 3, our headline read: "Sugar Surges to a 30-Year High on Tight Supplies." Then, just over a week later, our headline read: "Sugar Plunges from a 30- Year High." And now today's headline describes another surge. What is going on?

First, the facts:

• Sugar stocks are at their lowest level in two decades, as reported in the Wall Street Journal.
• The International Sugar Organization cut its prediction to a 60% smaller surplus of 1.29 million tons. Some analysts have forecast an even tighter surplus.

As is often the case, growth and recovery in America begins at ground level. Current upbeat news from regional food producers is signaling good news for many companies, including Deere & Company (DE). While developing industrial bases such as China and India have taken on the lion's share of mid to heavy manufacturing duties, they are also developing increased needs to feed hungry work forces. Indeed, they are also developing the capital to feed those needs.

The spin-off from this morphing consumption dynamic is a surge of growth in America's agricultural and food production sectors. Indications are that the increased demands being put upon American agricultural output is fueling an increased demand for heavy weight farm tractors and is requiring food processing facility expansions. "Sales of 100-horsepower tractors, which cost about $75,000 to $100,000 each, were up 27 percent last month over the same month last year, said Charlie O'Brien, vice president of agricultural services for The Association of Equipment Manufacturers, in an Associated Press interview.

There seem to be some ruffled feathers in the world of poultry. Shares of Tyson Foods (TSN) lost a hefty 2.75% Monday.

The Chinese government has decided that American chicken is being sold too cheaply in China. To prevent American poultry producers from further chicken "dumping," the commerce ministry is imposing new tariffs -- in some cases exceeding 100% -- on the imported birds for a period of five years. A lower tariff was already introduced earlier this year.

The yen weakened early Friday on speculation that the Bank of Japan will re-enter the currency market to further sell the yen to protect exports, Bloomberg News reported.

That sets up a classic struggle between the Bank of Japan, which has already intervened this month --- selling the yen to weaken the currency versus the dollar -- and yen-bullish institutional investors, who believe market forces will be stronger, and ultimately lead to a stronger yen versus the buck.

The yen weakened early Friday, rising as much as 1 yen to 85.38 yen to the dollar, before strengthening late Friday afternoon, to 84.29.

In upcoming talks with China, the United States will try for what seems like the 1,000th time to encourage China to let its currency, the yuan, appreciate quicker, even as a growing list of sponsors add their name to a U.S. House bill, The New York Times (NYT) reported, that would require the Obama administration to impose duties or other trade barriers in lieu of currency action by Beijing.

China keeps the yuan in a tight trading band, arguing that it must keep the yuan valued at a low level to protect embryonic companies and sectors.

The United States argues that the yuan's artificially-low value unnaturally draws in trade revenue via cheap exports that, under a market-value yuan, would flow to other countries.

Given the size and complexity of the U.S. economy, forecasts regarding U.S. GDP growth must be viewed with caution: they contain a margin of error, and are subject to substantial revisions. Even so, with consumer credit card-based purchases continuing to decline, one conclusion investors can draw is that U.S. GDP growth probably will be lower during this expansion than it was during previous post-Cold War era expansions.

One major reason? Historically, consumer spending has account for 65% to 70% of U.S. GDP. If consumer spending remains modest, it's highly unlikely that the economy will be able to grow as fast as it typically does when consumption is high.

The news on the import/export front is not good. The Commerce Department reported that our trade deficit widened to $49.90 billion in July, a 21-month high. Economists surveyed by the Wall Street Journal had expected the deficit to come in at $42.7 billion.

The wider deficit was caused by a increased imports and a drop in exports. Exports shrank by 1.3% to $150.45 billion, while imports jumped to 3.1% to $200.35 billion, up from $194.42 billion.