Corn prices are on course for a record, helping soybeans approach an all-time high too, Macquarie said as, heralding "the return of agflation", it hiked forecasts for farm commodity futures across the board.
The bank said 2011 would be a year of "high prices" in agriculture and food, with even products not facing extreme shortages seeing knock-on effects from, for instance, higher feed costs for livestock producers, or, for crops, a bitter scrap to be included in farmers' sowings schedules.
However, it singled corn as its "top bullish call" in the grains, thanks to an "acute supply squeeze" in the US, and echoed in a "dire position" in global supplies.
Even a failure by China to import corn in 2011 as many traders have expected, an outcome given extra credence by an apparent switch to wheat for feed needs, was not a significant risk to prices.
'Dramatic price increases'
"In fact, bullish risks appear to be mounting as Argentina's corn crop has already sustained drought-induced damage, and US ethanol and feed demand remains resilient despite high prices," Macquarie said.
"There are significant risks for dramatic corn price increases."
Even a production rise forecast at more than 35m tonnes in 2011-12, taking the world harvest to 846m tonnes, would not ease significantly the squeeze on supplies.
"The combination of strong feed demand growth in Asia and record US ethanol production is outstripping the world's current corn production capacity," the bank said.
Macquarie said it was "likely now that Chicago corn prices will take out the all-time highs last seen in June 2008", when the grain reached $7.61 a bushel.
Chicago's near-term, March contract stood at $6.36 ?a bushel as of 17:30 GMT on Thursday, down 0.7% on the day.
Rationing needed
Corn's prospects boded well for soybeans too, a strong competitor for acres with corn in America's spring sowing programme and which itself requires increased production to bolster supplies depleted by "insatiable" Chinese demand.
Indeed, the US would struggle to lift output in 2011-12 thanks to the high prices of other crops, notably corn and cotton, putting the world on course for another season of output deficit.
"The US soybean market must immediately ration crush and export demand for the remainder of the season to maintain pipeline supplies in the market into the summer months," Macquarie said, ramping its target for soybean prices for the second quarter by $5.50 to $16.50 a bushel.
Chicago soybeans, which set a record $16.63 a bushel in 2008, stood at $14.02 ?a bushel for March delivery.
'Serious concern'
Macquarie added that it was "relatively less bullish" on wheat, for which stocks were "more comfortable" this season than in the 2007-08 period leading up to the last price spike, when the grain topped $13 a bushel in Chicago.
Even so, prices of the grain would receive support from soaring corn, an alternative for many uses, and potentially from the escalation of dryness concerns too.
"Drought conditions in both the US and China's winter wheat areas are a serious cause for concern and could be a key factor inhibiting the needed wheat supply recovery.
"Canada, Australia, Europe and the Black Sea region must all produce better crops in 2011 versus 2010 in order to help stabilise global wheat stocks."
Wheat prices were set to average $9.00 a bushel in the second quarter before starting a decline which would take them to $7.20 by the end of 2012, the bank forecast.
Wheat for March was 0.3% lower at $7.95 a bushel.
