(Bloomberg) Corn prices are headed to a record $8 a bushel by late June as rising demand erodes global inventories and governments fail to keep inflation in check, said William Fordham, the president of C & S Grain Market Consulting.

The chart compares the price advance this year with four rallies since 1987 that were prompted by tight supply or rising demand. Corn’s 34 percent gain in 2010 already exceeds increases in three of the periods. In 2007-2008, the grain more than doubled to a record $7.9925 in June 2008. This time, corn may reach $8.03 by the end of June 2011, up 45 percent from yesterday’s close on the Chicago Board of Trade, Fordham said.



“The patterns are quite similar,” Fordham said by telephone from Ohio, Illinois. “If world demand for grain continues to expand, along with declining inventories, and governments continue to print money, then I expect much higher grain prices.”

On Nov. 9, corn futures touched a 26-month high of $6.175 in Chicago, after the government said adverse weather had reduced the size of the U.S. crop. Yesterday, corn futures for March delivery fell 10.75 cents to $5.555.

Production will total 12.54 billion bushels, 4.4 percent less than last year’s record 13.11 billion, the U.S. Department of Agriculture said last month. On Sept. 1, before next year’s harvest, unsold U.S. supplies will total 827 million bushels, the smallest since 1996. A La Nina weather event, caused by cooling equatorial waters in the Pacific Ocean, may reduce moisture in South America, increasing demand for U.S. crops.
“Prices may be destined to trade into new all-time highs that substantially exceed the 2008 highs,” Fordham said. “We could see $14 corn in the next two years” because of poor growing conditions around the world, he said.

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