Bloomberg's article was based on a report from the US Department of Agriculture (USDA), which stated that the annual gain for cereals and baked goods will be 9 to 10 per cent - above the 7.5 to 8.5 per cent forecast in May. Not only is this the highest since 1980, USDA warned that their prediction does not take into account the recent floods, which have damaged crops in the Midwest.

With global demand for food boosting US exports, production disrupted by bad weather and more crops going into biofuels, retailers are passing the higher prices on to consumers. Beef, pork and chicken prices have rallied while corn, wheat, soybeans and rice have reached record levels this year.

The USDA left its forecast for egg-price gains unchanged at 11 per cent while dairy products and beef are now forecast to rise as much as 6 and 3 per cent, respectively, according to Bloomberg.

Midwest Crops

The Midwest produces most of the country's corn and soybeans. Recent flooding there has delayed planting and damaged crops already in the ground.

"Estimates of the impact of potential supply disruptions on food prices will be included in next month's update once an assessment of the flood losses becomes available," commented USDA food economist, Ephraim Leibtag.

Corn futures rose to a record $7.915 a bushel on the Chicago Board of Trade on 16 June and jumped 30 per cent this month before the flooding affected yield predictions. The grain price has jumped 84 per cent in the past year as demand for livestock feed and ethanol threaten to reduce the global inventory to a 24-year low.

Soybean futures jumped 13 per cent this month, taking the price 80 per cent up from a year ago. It reached a record $15.865 a bushel on 3 March in Chicago.

View the Bloomberg story by clicking here.