Corn prices touch 2-year high

U.S. corn prices rose again Tuesday, at one point reaching a two-year high.

Climb adds to concerns of another food crisis

U.S. corn prices rose again Tuesday, at one point reaching a two-year high.

The December contract closed up 23.25 cents to $5.79 US a bushel on the Chicago Board of Trade.

Corn is harvested in central Illinois in September 2009. The U.S. Agriculture Department Friday forecast a dramatic drop in output this year. ((Seth Perlman/Associated Press) )

The contract has rallied 19 per cent over the last four sessions. During trading Tuesday, the price touched $5.8425, its highest level since August 2008.

Traders worried that world demand for animal feed, food and fuel would surpass supply.

On Friday, the U.S. Agriculture Department sharply reduced its estimate for American output this year because of bad weather.

The USDA predicted farmers will produce 12.664 billion bushels, down four per cent from its September estimate.

If the prediction bears out, that would result in reserves before next year's harvest reaching their lowest levels in 14 years.

The U.S. is the biggest grower and shipper of corn.

The forecast came as more overseas buyers are turning to U.S. corn to help feed their livestock after a drought ravaged Russia's wheat crop, including grains used to feed cattle and hogs.

Ethanol to take a third of crop

In addition, there is strong demand among ethanol producers and domestic livestock owners. The USDA estimated that, in 2010-11, the ethanol industry will consume 4.7 billion bushels, more than a third of the crop.

Barclays Capital analysts said in a report issued Monday that U.S. corn production is on track for the third-highest level on record.

At the same time, high consumption levels and demand for corn exports are taking U.S. corn supplies to their lowest levels in 14 years.

"The global corn market … suddenly finds itself on thin ice," the report concluded.

Traders worry prices could return to $6 a bushel, a level not seen since the food crisis of 2007 and 2008, which triggered riots in poor countries.

With files from The Associated Press