Chicago corn price jumps by 3% to highest since last autumn as maize, soybean and wheat yields also suffer due to drought
Fears that food prices will rocket at the end of the year after a poor US harvest were heightened after predictions that a drought across the Midwest will to continue for at least another week.
Maize yields are suffering after a long drought that hurt the crop in its crucial pollination phase, experts said, as the price of Chicago new-crop corn jumped more than 3% to its highest since last autumn.
Soybean crops and the crucial wheat harvest are also expected to suffer in the blistering heat, which has stayed in the high 30s centigrade for much of the last few months. A repeat of the drought in 2010 in another crucial wheat producing country, Russia, which saw food prices rise in the UK, is likely to make the situation worse, while soybean producers Brazil and Argentina have also suffered poor weather.
The US government played down the extent of the problem with figures showing farmers planted more fields of maize and soybeans, which it said should offset the fall in crop yields.
But traders argued the drought was serious and likely to push up prices further. The Chicago Board of Trade (CBoT) December corn contract rose 3.2% to $6.55 (£4.17) a bushel, while November soy added 0.7% to reach $14.38 a bushel. September wheat gained 1.2% to $7.66 a bushel.
US December corn jumped almost 15% last week and September wheat gained more than 10%, while November soybeans added nearly 4%.
Luke Mathews, a commodities strategist at the Commonwealth Bank of Australia, said: "Hot, dry weather across the US and the declining yield potential is driving the increase in corn today. Wheat is being dragged along by the strength in corn, like soybeans too."
Crop forecasters have been reducing their estimates on the US corn crop output following the hot and dry weather.
Private analytical firm Informa Economics lowered its forecast of the 2012 corn yield to 154.9 bushels per acre from its 15 June projection of 163.4, trade sources told Reuters.
As a result, large speculators bolstered their bets on further rises in prices. Hedge funds have become key speculators on commodity prices in recent years and data supplied by the CBoT showed they and other firms spent the last week betting prices were set to rise. Commodity price rises accounted for a large slice of the UK's inflationary surge during 2010 and 2011.
[Female shopper checking food labelling in supermarket, via Shutterstock.com]