Corn soars to 8-year high as dry global weather hits crops - while soybeans and wheat are also booming

• Corn prices have surged to an 8-year high as dry weather hits crops around the world.
• Pressure is also building in the markets for soybeans, wheat and even cheese.
• Analysts say the rise in crop prices could lead to higher-than-expected inflation.

Corn prices have soared to a new eight-year high as dry weather around the world hits crops and weighs on supply, just as demand is picking up as economies reopen.

Soybean and wheat prices are also trading at around 8-year highs, while traders are piling into US cheese futures in anticipation of restaurants reopening.

"Grain and soft commodities remain on fire, as the immediate supply outlook continues to tighten on a combination of drought in Brazil, cold weather slowing the planting progress in the US and surging overseas demand, especially from China," Ole Hansen, head of commodity strategy at Saxo Bank, said.

The price of corn for delivery in May rose 2.5% to $6.98 a bushel on Tuesday morning, according to Bloomberg data, having earlier risen to $7.20.

Corn rose so sharply on Monday that the Chicago Board of Trade commodities exchange had to limit trading. Prices are up around 40% so far in 2021 to their highest level since early 2013, according to Bloomberg data.

Elsewhere in the agriculture market, soybean prices have risen for 10 sessions in a row, while wheat prices have climbed more than 25% in April, according to Hansen.

Prices are shooting up due in large part to dry weather around the globe, particularly in Brazil, which is expected to limit the amount of crops that can be produced.

Dry conditions in the US Midwest are also adding to the pressure in the market, at a time when analysts expect demand for perishable goods to rise as economies come out of coronavirus lockdowns.

In the US, traders in cheese futures are increasing their holdings in anticipation of higher demand over the coming months. Traders now hold contracts worth 64 million pounds of block cheddar, up from around 9 million at the start of the year, according to the Financial Times, which cited CME data.

Hansen said the rise in agricultural prices could add to worrying inflationary pressures in the economy.

"Adding these gains to already elevated fuel prices and surging industrial metals, it raises questions about central bankers' commonly shared view that rising consumer prices will be transitory and, as such, should not be a major concern," he said.