Corn prices have hit new highs after the US Department of Agriculture forecast that output would fall because of poor weather.

Corn hit a record price of $6.672 a bushel for July delivery on the Chicago Board of Trade after the government cut its forecasts for the 2008 yield by 3%.

Crops have been hard hit by wet weather and flooding in the US.

To exacerbate the problem, demand for corn for both food and fuel has been increasing worldwide.

Joe Victor, an analyst with Allendale said: "The biggest surprise is how aggressive the US Department of Agriculture was in dropping yield."

The government also reduced its forecast for corn supplies running to 31 August 2009 to its lowest in more than a decade, at 673 million bushels or three weeks' worth of supply.

As well as bad weather, growing demand for corn worldwide to feed animals and make biofuels has pushed up prices.

As oil prices rise, using corn in biofuels as an alternative to fossil fuels becomes more attractive, and this has helped to raise the price of corn from about $4 a bushel a year ago to its current record levels.

(BBC)

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