The worldwide squeeze on corn supplies is a "cause for concern", the United Nations warned, as it cut its estimate for both production and inventories of wheat and coarse grains, and flagged rising prices.
The UN slashed by 13.7m tonnes, to 1.15bn tonnes, its forecast for world output of coarse grains in 2011-12, reflecting weaker hopes for the US corn harvest.
"Continued hot weather in July and August is expected to hamper yield potential in the major growing areas of the Midwest," the UN’s food agency, the Food and Agriculture Organization (FAO), said.
The weather setback had left the corn "supply situation" as a "cause for concern", the FAO said, cutting its estimate for global inventories of coarse grains, which also include the likes of barley and sorghum, at the close of 2011-12 by 2.7m tonnes to 160.9m tonnes.
Wheat vs corn
The weaker prospects for corn production meant prospects looked set to spill over into the wheat market too, encouraging livestock farmers to switch grains.
"Wheat utilisation for feed [will rise] sharply, mostly because wheat prices have become increasingly competitive compared to corn prices due to a larger supply of wheat compared to corn, and to some extent barley," the FAO said.
The agency ditched expectations of a rise in wheat stocks over 2011-12, slashing its forecast for stocks at the end of the season by 10m tonnes to a three-year low of 182.5m tonnes.
The downgrade came despite better hopes for the world harvest, which was pegged at 680.6m tonnes, 5.0m tonnes higher than previously expected and only marginally below the record high set two years ago.
"A sharp recovery in the [former Soviet Union], combined with significant increases in North Africa and India are expected to more than offset a fall in wheat output in the US."
The comments came as the FAO revealed that rising cereal values had kept food prices close to February’s record high, despite declines in sugar and oilseed markets.
Sugar prices had eased on "positive production prospects for Europe, India, and Thailand", the FAO said, while attributing a continued drop in prices of vegetable oils to an "increase in the global production and export supplies of both palm and sunflower oil".
The agency also flagged the impact on cereal prices of the reintroduction by Thailand’s new government of a policy of stockpiling rice, bought from farmers at above-market rates.
The FAO’s overall food price index fell by one point last month to a figure of 231.