U.S. corn prices surged 6.5 per cent on Friday to their highest levels since the food crisis of 2008, setting the stage for record global food prices - which have sparked social unrest - to push even higher.
Futures, which rose 4.5 per cent on Thursday, were fuelled by strong demand for corn to make food and fuel. That demand has whittled down the corn supply, which was already at its lowest level in 15 years in the United States, the world's top exporter of the grain.
Demand has been strong from the livestock and ethanol sectors, and from importing nations, including China which is believed to have purchased 1.25 million tonnes last week.
This week's rally, triggered by the U.S. Agriculture Department's lower-than-anticipated quarterly U.S. corn stocks estimate on Thursday, rekindled worries about food price inflation.
The UN Food and Agriculture Organization's Food Price Index hit its second straight record in February, driven by rising grain and energy costs and tighter supplies of food staples.
The group warned last month that surging prices of basic foodstuffs increased the risk of unrest in developing countries, like the food riots seen in 2008. Surging food prices played a role in the recent unrest throughout the Middle East and North Africa by stoking popular anger about unemployment and stagnant economic development.
The near-term supply concerns have largely overshadowed USDA's forecast that U.S. farmers will plant the second-largest corn acreage since 1944.
"The market is clearly moving itself into a rationing position here. Eight dollars (a bushel) is being thrown around as a level where we might get a market that is starting to ration supplies," said Sterling Smith, an analyst with the consultancy Country Hedging.
"Corn basically gets turned into pork, chicken and beef. Tighter supplies of corn will eventually lead to higher food prices to offset some of the input costs. The consumer is now going to have to pay for it," he said.
Corn for May delivery on the Chicago Board of Trade rose by as much as 45 cents on Friday - the maximum allowed under exchange rules - to a 2-3/4 year high of $7.38-1/4 a bushel, a 6.5 per cent gain that was the strongest in nine months.
But soybeans shed 1 per cent as investors booked profits following Thursday's rally. Additional pressure stemmed from forecasts of bumper crops in South American and worries that demand from China may be easing, with rumours swirling that the world's top soybean importer was seeking to cancel some export purchases.
"Beans are down on talk China canceled soybean business from Brazil. China's crush margins are poor, so they may back away from beans," said Paul Haugens, vice president for Newedge USA.
Soybeans for May delivery fell 18-3/4 cents, or 1.3 per cent, to $13.91-1/2 per bushel. It was the steepest decline in 2-1/2 weeks.
Wheat fell 0.7 per cent on profit-taking following a 5 per cent surge on Thursday to a three-week high, despite lingering worries about poor crop weather in some key U.S. Plains production areas.
CBOT May wheat fell 5-1/4 cents to $7.58 a bushel after earlier rising to a 3-1/2 week peak of $7.74 on spillover support from surging corn.