Farm-commodity prices including corn will extend rallies next year driven by increased demand from emerging markets including China, the world's most populous nation, and higher energy costs, according to Rabobank Groep NV.

There was "rampant demand" for agricultural commodities from China, and rising corn prices may drive gains in other grains, according to a report yesterday from analysts at the bank. Surging crude-oil costs, low global food stockpiles and a weakening dollar may also bolster prices, the report said.

Rabobank's predictions add to forecasts that food costs may surge next year, potentially raising inflation and paving the way for a reprisal of the bull market in 2008, when prices surged to records. Increased Chinese purchasing of global crops is "reshaping" some farm commodity markets, the report said.

"Corn will drive the grains complex" next year, with China importing as much as 8 million metric tons, the report said. "We look for higher energy prices in 2011 to be a catalyst for higher agricultural prices."

Corn in Chicago has jumped 45 percent this year and traded at $6.035 a bushel today, while wheat has gained 41 percent and soybeans have rallied 27 percent. The Food & Agriculture Organization's index of 55 food commodities rose for a fifth month in November to the highest level in more than two years.

'Rebuild Inventory'

"Favorable weather conditions are necessary for almost all agricultural commodity markets in 2011 to rebuild inventory levels and prevent a rally on prices back to the highs of the 2007-08 commodity boom," the report said.

David Fuller's view This is one of the important themes discussed on most days in the Fullermoney Subscriber's Audio. Even if the world were to have exceptionally favourable crop cycles in 2011, this would not alter the tight supply situation significantly until late in the year.

Meanwhile, the Continuous Commodity Index, also known as the Old CRB (monthly & weekly) has already exceeded its 2008 peak. This is the most representative index for commodity markets, in my view, because it has more agricultural and industrial constituents, and is also unweighted.

Subscribers can monitor all of the individual commodities in the Chart Library.