China's rapid economic growth is resulting in more demand as their consumers both buy more food and shift their food mix toward more animal products such as meat, milk and eggs, which require corn and soybeans to produce, said Abbott, whose work focuses on international trade and agricultural development.

"However, we also found that about 40 percent of the increase in Chinese soybean imports in recent years was due to increasing their inventories - building stocks," Abbott said. "We believe they now have sufficient stocks levels, and that could slow their overall rate of growth of purchases in coming years."

That economic growth contributes to China's demand for soybeans, crude oil and other commodities, Abbott said.

"The movement of agriculture into biofuels has now linked the oil market to the corn market and to agricultural markets in general," he said. "If oil is high-priced, this will tend to mean agricultural markets are high-priced as well. All of that is contributing to higher commodity prices in general."

The authors also noted that agricultural markets have become less responsive to price changes, leading to both high prices and greater volatility in prices. Most of the U.S. corn used for ethanol is mandated by the government. The mandate requires that 12.6 billion gallons be blended into gasoline in 2011. It will increase to 15 billion by 2015.

That requirement creates what economists call an "inelastic" market.

"The amount of corn that it takes to produce that will be used in the U.S. whether corn is $2 a bushel or $10 a bushel," Tyner said. "That's pretty inflexible."

Other inflexibilities are coming from foreign buyers who want basic food commodities - almost regardless of price - and from the livestock sector, which now can afford to pay much higher prices for feed than just a few years ago.

High corn, soybean and fuel prices eventually make their way into higher retail meat prices, the economists noted. The animal industries suffered heavy financial losses in 2008-09 when producers began to reduce herds and flocks after feed costs escalated and a world recession set in. That reduction in meat supplies forced retail prices up in 2010 and now to record-high retail prices for beef and pork in 2011.

Ethanol production has grown rapidly the past five years, but the rate of growth in mandated levels is beginning to slow, the authors said. This means that the demand base that has built up will persist but will not grow as quickly in the next few years.

Looking to the future, they say a slowing rate of growth in both corn use for ethanol and in soybean purchases by China could provide a better chance for world grain supplies to catch up to slowing demand surges.

"But it's unlikely that we will go back to having huge surpluses because that demand base remains so strong," Hurt said.

The full report is available at http://www.farmfoundation.org, where previous reports also are posted.