June 12 (Bloomberg) -- Corn advanced to a record for a sixth day on speculation the U.S., the world's biggest producer and exporter, may reduce its crop forecast, straining global food supplies and stoking inflation.

Soybeans gained to a three-month high. Heavy rains in the U.S. Midwest have flooded farmland and cut yields. U.S. corn production may drop by 10 percent from last year and inventories may decline to a 13-year low before the harvest next year, the U.S. Department of Agriculture said June 10.

Corn has gained 18 percent this month and 80 percent in a year on demand for ethanol and for livestock feed as rising Asian incomes boost meat consumption. Wheat, rice, soybeans and palm oil also reached records this year, spurring riots from Haiti to Egypt and Cameroon.

Low stockpiles and poor weather are ``an explosive mix,'' John Reeve, associate director for agricultural commodities at UBS AG in Singapore, said by e-mail today. ``Corn is central to the agricultural complex, so a sustained period of higher corn will see higher wheat, coarse grain and meat prices.''

Corn for July delivery rose as much as 18.5 cents, or 2.6 percent, to $7.2175 a bushel in after-hours trading on the Chicago Board of Trade after gaining the daily limit of 30 cents yesterday. It traded at $7.08 as of 11:08 a.m. in London. Still, adjusted for inflation, corn is less than half the price it reached in 1974.

Corn and soybeans pared early gains as the dollar rose against the euro and yen on speculation a rebound in U.S. retail sales may support the Federal Reserve's case for raising interest rates, reducing the appeal of commodities, including crude oil and gold, as an alternative investment.

Food Shortage

``With heavy rains in the Midwest and an expected heat-wave in the summer, only heaven will dictate the market's direction from now,'' Nicholas Chung, senior manager of the commodities team at Korea Development Bank in Seoul, said by phone today.

U.S. corn production will be 11.735 billion bushels this year, compared with 12.125 billion bushels forecast on May 9 and 13.074 billion bushels last year, the USDA said.

Estimated U.S. corn inventories of 673 million bushels by Aug. 31, 2009, a 53 percent drop from a year earlier, would represent 5.4 percent of annual consumption, or 20 days of use. That's down from 40 days this year and the lowest since 1996 when reserves were projected to last 18 days.

Japan, the world's biggest corn importer, will increase floor prices for domestic meat for a second time this year and boost subsidies to livestock farmers after prices of the grain soared to a record, the Ministry of Agriculture, Forestry and Fisheries proposed today at a panel meeting.

Price Riots

United Nations Secretary-General Ban Ki-moon called this month for a 50 percent increase in food production by 2030, saying that failure to feed the world's growing population will spark civil unrest and starvation.

``The world needs to produce more food,'' he said June 3 at the World Food Security conference in Rome. ``While we must respond immediately to high food prices, it is important that our longer-term focus is on improving world security.''

A 60 percent increase in food prices since the beginning of 2007 has sparked riots in more than 30 countries that depend on imported food. The wealthiest nations pledged $6.3 billion in emergency aid last year.

Growing demand for grain-fed meat in Asia, market speculation, declining stocks and the push to grow corn for ethanol contributed to the price surge, according to the United Nations Foundation, which funds and manages development projects.

`Food Shock'

Soybeans for July delivery gained as much as 1.5 percent to $15.3875 a bushel, the highest since March 5, before trading at $15.1075. Wheat fell 1.2 percent to $8.5875 a bushel after trading as high as $8.83, the highest since April 18. Rice was up 0.2 percent to $19.97 per 100 pounds.

Soybeans reached a record $15.8650 a bushel March 3. Wheat climbed to $13.4950 Feb. 27 and rice touched $25.07 April 24.

Food prices will stay ``well above their mean levels of the past decade'' in the next 10 years, the FAO forecast in a joint report in late May with the Organization for Economic Cooperation and Development.

``While the world's facing another oil shock, the surging food price has caused a food shock,'' Chung said. ``For oil, we can reduce the use, but for food, you can't live without that. The food shock is scarier.''

Spiraling oil and food prices are forcing central banks from Indonesia to North America to switch from fostering growth to quashing inflation. The Reserve Bank of India unexpectedly lifted interest rates late yesterday.

After lowering the key rate by 325 basis points to 2 percent since September, Chairman Ben S. Bernanke signaled June 9 that borrowing won't get any cheaper. Policy makers will ``strongly resist'' any surge in inflation expectations, Bernanke said.

The Philippines, the world's biggest rice importer, ordered the release of 300,000 tons from state stockpiles to ``flood the market'' and curb local prices up 39 percent in the past year, National Food Authority Spokesman Rex Estoperez said today in a phone interview, without giving a timeframe.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net

Last Updated: June 12, 2008 06:28 EDT