A 10 per cent rise in the cost of US corn and wheat in just one week is sparking fears of a significant increase to world food prices.
Record-breaking hot, dry weather in the US Midwest is causing the price hike, with similar weather not seen since 1988, when the country experienced one of the most damaging droughts in US history, which cut the country's corn production by more than 30 per cent.
Farmers had forecasted a huge production year, and planted high levels of corn and wheat to meet the changing global food demands.
But with drought conditions stressing corn plants, lower yields will be achieved from the fields.
"The corn crop is entering the key pollinating and yield-setting period and continued dry weather is a big concern for yields," Barclays Capital analysts said.
"The optimistic scenario of agricultural surpluses that 2012 was supposed to herald may not transpire."
In response, investment bank Goldman Sachs raised its price forecasts for corn futures contracts up US$1 to US$6.25 per bushel, to address tandem wheat and corn prices.
When corn prices increase, wheat prices trend downwards, as demand increases for the commodity to replace corn in animal feed.