March-delivery corn added 0.7% to US$6.2025 a bushel on the CBOT at 2:14 p.m. Paris time. The grain has advanced 50% this year, more than the 18% climb by the Standard & Poor's GSCI Commodity Index.

 

World corn inventories will slide 12% to a four-year low of 130 million tonnes at the end of the current season as demand outstrips production, USDA forecast December 10. The USDA outlook assumes a record harvest in Argentina of 25 million tonnes, unhurt by dry weather.

 

"We've seen the weather in Argentina and other parts of South America, and that will probably result in some crop losses," said Michael Pitts, commodity sales director at National Australia Bank Ltd. The USDA will likely cut production estimates in its January report, supporting prices through the middle of 2011, he said.

 

Corn consumption is forecast by the USDA to outstrip production by 17.2 million tonnes this season as global harvests of wheat were ravaged by drought and excessive rains, tightening supply of grains used in food and livestock feeds. Demand for corn is being driven by increased use of animal feed in China and ethanol in the US.

 

According to USDA data, production of wheat was forecast to trail demand by 20 million tonnes, taking inventories at the end of this season to the lowest level since 2008-2009.

 

March-delivery wheat gained 0.2% to US$7.86 a bushel, taking this year's climb for the most-active contract to 45%.

 

Wheat rose this year as drought devastated crops in Russia, halting shipments from the world's second-biggest exporter of the grain in the 2009-2010 season. Excessive rain in Canada, Australia and Germany harmed crop quality, lowering the supply of milling-quality wheat.

 

Milling wheat for January delivery added 1.8% to EUR252.50 (US$337.59) a tonne on NYSE Liffe in Paris. Wheat futures jumped 92% in the French capital this year.

 

Overall world grain production, including corn and wheat, will lag behind demand this year for the first time in three years, according to a report released by the UN's Food and Agriculture Organization earlier this month.

 

Output of all cereals will drop 1.4% to 2.23 billion tonnes this season, while demand will rise 1.8% to 2.26 billion tonnes, the FAO said.

 

"On the fundamentals for wheat, we don't think too much has changed over the last couple of weeks," Pitts said. The effect of dry weather on Argentine corn "will be supportive of wheat. We expect investor inflows" into grains, he said.

 

Soy for March delivery added 0.8% to US$13.8725 a bushel in Chicago, taking gains for the most-active contract to 32% this year, the second annual climb and the largest in three years.

 

Argentina's soy crop, the world's third-biggest, may face another month of drought caused by La Nina weather conditions, stated Jim Dale, senior meteorologist at High Wycombe, England-based forecaster British Weather Services.