Corn prices touch 2-year high

U.S. corn prices rose againTuesday,at one point reachinga two-year high.

The Decembercontract closed up23.25cents to $5.79 US a bushel on the Chicago Board of Trade.

The contract has rallied19 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 reducedits estimateforAmerican output this year because of bad weather.

The USDA predicted farmers will produce12.664 billion bushels, down four per cent from its September estimate.

If the prediction bears out, that wouldresult 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 industrywill 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 exportsare 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.