Bushels of corn reached their highest prices in nearly three years this week after the U.S. Department of Agriculture (USDA) reported that corn inventories will fall to levels not seen since 1996.

We’ve witnessed nearly a 100 percent surge in the price of corn over the past year as increased demand has been met with diminishing supply. Dry weather conditions due to La Niña in Argentina and other disruptions have shriveled supply despite a near record amount of acreage being planted. Globally, corn consumption has increased 10 percent over the past five years to reach record levels and stock-to-use ratios for corn suggest we’re currently experiencing the tightest global corn market since the late 1970s, according to Macquarie.

This jump is due to increased corn consumption for ethanol and greater demand for feed grain. The USDA estimates that just under 40 percent of U.S. corn production will be consumed for ethanol, up from 31 percent in 2008-2009. China will likely need to import 5 million tons of corn in 2011 in order to meet the country’s booming need for feed grain. In the U.S., an additional 60 million bushels will be used for feed despite a reduction in livestock, according to the Des Moines Register.

Corn is just one part of the food pyramid that is rising. Around the world, prices for wheat, soybeans, cocoa and other grains have jumped in the last 18 months in conjunction with the global recovery. Prices have jumped because demand outstripped supply.

This chart from Potash Corp. shows that grain production has failed to meet consumption in seven of the past 11 years. This is despite producing a significantly larger amount of grain in 2009 than in 2000. Potash Corp. estimates world grain production declined more than 4 percent in 2010. An extreme drought in Russia chopped grain production in the country by 38 percent and 13 percent in neighboring Ukraine.

These tight supply/demand fundamentals reflect the impact of a growing global population and increasing economic strength in emerging markets, Potash says.

As per capita wealth has grown in other countries, there has been a huge jump in demand for grains. This chart shows the amount of bushels consumed as GDP per capita rises.

Much of the rise is due to people consuming more meat as their fortunes rise. To meet this higher protein diet, more chickens, cows and hogs are fed grains and demand skyrockets. You can see that China and India are still in the very early stages of increased consumption.

We think the agricultural space is ripe with opportunity. With global grain inventories relative to demand at multi-year lows and the rising emerging market middle class showing a healthy appetite for more meat and dairy products, demand for increased crop yields should remain strong.

None of U.S. Global Investors Funds held any of the securities mentioned in this article as of 12/31/10.

Demand for natural resources in the emerging world is increasing, but how much of this increased demand is met by the country’s own production?

This interesting chart from Bank of America-Merrill Lynch shows the supply/demand fundamentals of several key industrial metals and basic materials.

The dotted line represents a key tipping point. The resources to the left of the line are those the BRIC countries must obtain outside of their own borders in order to meet domestic demand. The BRICs produce an excess amount of the two metals to the right of the line and export the remaining amount to other countries.

Last year, copper, nickel and coal were all top-half performers of the 14 commodities we track in our popular periodic table. The two metals the BRIC nations produce an excess amount of (aluminum and zinc) were among the worst-performers.

These materials are the necessary elements needed for emerging nations to take the next steps in their development. You can see that the BRICs must rely on imports in order to meet demand for metallurgical coal, copper concentrate, thermal coal, iron ore, refined copper and uranium.

For example, BRIC production of metallurgical coal is less than 20 percent of BRIC consumption. Met coal, or coking coal, is used to make iron and steel—very important to the infrastructure build-out taking place in Asia.

Thermal coal is also important because it is principally used for power generation. Coal is the primary source of electricity in the emerging world, supplying more than 50 percent of Asia’s power. The BRICs consumed nearly 2 billion tons of coal for electricity in 2009, according to BP’s World Energy Statistics.

In order to combat these supply deficiencies, the BRICs have looked beyond their borders. In India, there were 27 cross-border deals in the metals and ores sector last year, according to research firm Grant Thornton.

China has been especially proactive in this regard. From 2005 through early 2010, the country inked more than $45 billion worth of cross-border deals for coal, copper and iron ore. These are deals in countries near (Vietnam, Mongolia) and far (Peru, Canada).

We think these areas are especially important for investors because these are the areas where we’re seeing wider profit margins and stronger returns on capital. This is why our Global Resources Fund (PSPFX) is currently seeking the best opportunities in this area.

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.

BRIC refers to the emerging market countries Brazil, Russia, India and China.

Over the past few months, there’s been a buzz surrounding rare earth metals. These are metals such as europium, lanthanum, neodymium and 14 others found in small concentrations attached to other metals and resource deposits. They’re actually not that rare, just expensive and difficult to pull out of the ground.

These naturally occurring elements are essential in everything from wind turbines to lasers to iPads.

Rare earths are a conundrum for the environmentally conscious—they hold the key to green energies but create toxic waste when being separated away from other elements. “Just one wind turbine generating 3 megawatts of electricity requires 600 kilograms of rare earths for its magnets,” a source told the United Kingdom’s Guardian newspaper.

Electric and hybrid cars can contain more than twice as much rare earth metals as a standard car. This image from the NY Times breaks down how these metals make up critical elements of a Prius.

Currently, China controls 97 percent of the world’s production of rare earth metals. In October 2010, the country cut exports of the metals by 70 percent, disrupting manufacturing in Japan, Europe and the U.S., and sending the prices of these metals up 40 percent.

China currently controls production but the country only has 37 percent of the world’s estimated reserves. This second visual published by the NY Times shows the identified rare earth metal deposits around the globe.

The U.S. used to be a top manufacturer of rare earth metals back in the 1960s, but eight years ago environmental infractions shut down the Mountain Pass, California mine, the largest deposit of rare earth metals outside of China. Currently, there are efforts to restart production at the mine but several hurdles must be cleared first. Today, the U.S. imports 87 percent of its rare earths from China.

Other countries such as Kenya, South Africa, Malawi and Greenland are believed to be sitting atop large deposits of rare earth metals as well.

Increased production outside of China is required in order to meet increased demand. Estimates show that global demand is expected to reach 205,000 tons by 2015, according to the Guardian. As high tech becomes a greater part of people’s lives in both the developing and emerging world, the importance of these metals should continue to rise.

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