Food prices set to rise after US cuts crop stock forecasts

Fears of a steep rise in food prices have increased, after the US government cut its forecasts for stocks of key crops including corn.

Corn surged to an almost 30-month high in morning trading, after the US government cut forecasts for domestic inventories, tightening global food supplies, after adverse weather slashed harvests.

The price of wheat also climbed.

Corn for March delivery advanced as much as 1.7pc to $6.42 (£4.08) a bushel, the highest price for the most-active contract on the Chicago Board of Trade since July 2008.

The contract extended yesterday’s 4pc jump and traded at $6.375 by 7am London time.

The US Department of Agriculture (USDA) lowered its estimate on the country's corn harvest last year, widening the global production deficit by 14pc to 20.1m metric tons, from 17.2m tons in December.

Stockpiles before this year’s harvest from the US, the world’s largest grower and exporter, will fall to 745m bushels (18.9m tons), the smallest since 1996, the USDA said.

US stockpiles will be “extraordinarily tight,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, said in a report. “Those tight stocks prompted record U.S. corn prices a few seasons ago.”

Corn futures surged to a record $7.9925 a bushel in July 2008 as global supplies of the grain and other cereals including rice and wheat tightened. Concerns of food shortages sparked protests from Haiti to Egypt.

The Standard & Poor’s GSCI Agriculture Index, which tracks eight futures, has surged 70pc since the end of June as drought in Russia and excessive rains in Canada and Pakistan, curbed harvests.

The widening deficits in corn and wheat, and declining supplies of soybeans have helped fuel fears of a repeat of the food shortage scare in 2008.

The United Nations’ Food and Agriculture Organization Food Price Index surged to a record last month, surpassing the previous high in 2008.

Wheat for March delivery gained as much as 1.6pc to $7.825 a bushel on the Chicago Board of Trade, before trading at $7.7275.

Cattle futures yesterday climbed to a record and coffee rose to a 13-year high. The Thomson Reuters/Jefferies CRB Index of 19 raw materials yesterday extended an advance to the highest level since October 2008.

Adverse weather led to a drop in 2010 corn production in the U.S. and a smaller harvest of soybeans than expected, government data show.