Are we heading into a "Silent Tsunami," the sheer mass of which could starve - rather than drown - most of the planet? Are we "two rainy weeks" away from a severe global food crisis?

These are the doomsday scenarios experts like Diana Klemme, a risk management specialist on global food prices for the Grain Service Corp., warned about at this week's Roundtable, hosted by the Commodity Futures Trading Commission (CFTC), in Washington, D.C.

Klemme's and others' observations were supported by tables and charts of data and testimony by members of commodity boards, associations, financial entities, investors and regulators, all pointing to the world food market's position being so precarious as to be at the mercy of any market-shaking event - be it weather, war or economic forces.

At the very least, the evidence makes a case for immediate action. But which act will restore the delicate balance that has come apart? This was the dilemma facing nearly 40 representatives as they gathered for six hours on April 23.

Watch The Grain Elevators

The current canary in the agricultural commodity coal mine are the grain elevators, which are caught up in a tangled web of rising prices, margin calls and the emerging credit crunch.

Grain elevators are the grease in the wheels of the American agricultural economy. They buy crops from farmers either for cash or on fixed contracts, allowing those farmers to lock in prices for their goods. That's critical, as farmers can't plan for the long term (invest in new tractors, buy increasingly expensive fertilizer, etc.) without knowing they can get X dollars for their crop. Ag prices are too volatile otherwise.

The grain elevators profit by selling futures contracts on the crops that are a little bit more expensive than the amount they pay their farmers. The contracts aren't speculative, just enough to cover operators' costs and a little extra, Don Sullivan, senior examiner and portfolio manager for the Farm Credit Administration, tells HAI.

And here comes the challenge. As the price of basic foods has risen all over the world for myriad reasons - from climate-change-induced drought in Australia destroying two back-to-back crop seasons to developing economies becoming rich enough to buy meat (it takes seven pounds of grain to produce one pound of meat) - futures exchanges have been issuing margin calls on the grain elevators' contracts.

It makes sense. Typically, you only put up a fraction of the value of the contracts in cash to buy them. But with the price of rice up 118%, wheat 95%, soybeans 88%, corn 66%, cotton and oats 47%, those fractions are getting a lot bigger. In some cases, they are more than the grain elevators are worth themselves.

The problems are exacerbated by the credit crisis, which has made new cash harder to come by for the elevators.

In some cases, grain elevators have stopped hedging prices altogether. And that's where it gets ugly.

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