Wheat is back in play, pressure on food supplies in China and India

Wheat prices surged 6% yesterday. While this may not be an omen of another broad-based commodity rally on the rails, tactical moves can pay off.

Construction and manufacturing come and go, but the food play is here to stay. Demand for soft commodities like grain is relatively inflexible — once people start eating, they tend to keep eating.

And keeping them fed is a matter of critical importance for the governments that can pay market price for shipments of grain and other produce.

There is enormous pressure on countries like China and India to manage food prices, while other places like Egypt can see entrenched regimes fall simply because the cost of importing wheat becomes unsustainable.

Last year was the third-largest global grain crop in history, but consumption still overwhelmed demand. To quote a top analyst, a good harvest is no longer good enough — and a bad one can be awful.

With all this in mind, producers of fertilizer and other crop chemicals are becoming extremely strategic. This is not a cyclical play but a true demand story.

POT (quote) is top of the heap and an early voice out there warning that demand for fertilizer does not go away as the world economy ebbs and flows.

ICL (quote) and MOS (quote) are also names to watch here.