Rabobank warns of record high food prices

World food prices will exceed last year's all-time high, with droughts in parts of the US, South America and Russia pushing up animal feed costs, spurring meat and dairy farmers to cut herds, according to agricultural financial institution Rabobank International.

Food prices tracked by the UN may rise 15 per cent by June 2013, past the peak scaled in February 2011, according to Nick Higgins, an analyst at the bank.  He said in a report, that grain and oilseed prices should ''remain at elevated levels'' for at least the next 12 months to ration demand and encourage crop farmers to boost planting.

The worst US drought in half a century, which followed dry weather in South America in the past season, pushed corn prices to a record $8.49 a bushel on 10 August on the Chicago Board of Trade and soybeans to an all-time high of $17.89 a bushel on 4 September.

Gains in livestock have fallen below feed costs because slaughtering animals created a temporary glut in meat supplies, before output ultimately turned lower, according to Higgins.

''The impact of higher grain and oilseed prices will be significant for the animal protein and dairy sectors as they are likely to be squeezed by higher feed costs,'' Higgins said. ''The full effect of this commodity price rally and the subsequent lower meat and milk output will be a multi-year rebuilding of herds, which will sustain high price levels.''

Spot-market hog prices are expected to rise 31 per cent by the end of June, while slaughter-ready cattle prices increase 6 per cent, Rabobank said. Grain prices could be up 3 per cent by the end of June while soybeans would fall 16 per cent as production rebounds in South America, according to the report.