(Bloomberg News) The U.S. is reaping its smallest corn harvest in three years after a drought damaged what was a record crop as recently as July, driving annual prices to an all-time high and curbing an expansion in global food supplies.

The government will forecast production of 314.7 million metric tons tomorrow, 27.4 million tons less than four months ago, the average estimate of 30 analysts surveyed by Bloomberg showed. The cut is equal to output in Argentina, the second- biggest exporter. The U.S. Department of Agriculture already expected a third annual drop in global corn stockpiles and the first in soybean inventories in three years, offset by an expansion in wheat reserves to the largest in a decade.

Corn, used mostly to make livestock feed and ethanol, is the only one of eight members of the Standard & Poor's GSCI Agriculture Index to gain this year. At a time when global food prices tracked by the United Nations fell 9.1 percent from a record in February, U.S. consumers are paying the most ever for pork chops, ground beef, flour and cheese. World food costs are 68 percent higher than five years ago and combined corn, wheat and soybean stockpiles are dropping to a three-year low, data compiled by Bloomberg show.

"The situation has improved, but it remains tight," said Michel Portier, the head of Agritel, a Paris-based adviser to about 2,000 farmers. "The smallest weather problems could cause a price jump. For now all goes well, but it's clear that on a global level, we still need a good harvest in 2012."

Soybeans Slump

Corn futures have climbed 4.6 percent this year to $6.58 a bushel as of 9:32 a.m. on the Chicago Board of Trade, outpacing the 12 percent drop in the S&P GSCI Agriculture Index. Prices jumped 15 percent from this year's low of $5.7225 on Oct. 3, and the most-widely held option gives the owner the right to buy corn at $7 by Nov. 25. Futures indicate rising prices through at least mid next year. Soybeans have slumped 14 percent this year to $12.10 a bushel as wheat tumbled 19 percent to $6.455.

The USDA probably will cut its corn forecast tomorrow for a fourth consecutive month after yields were curbed by the hottest summer since 1955 in the Midwest, the main growing region. U.S. stockpiles before next year's harvest begins in September may drop 29 percent, reducing global inventories to a five-year low of 122.75 million tons, the analysts surveyed said.

Wheat Supplies

World wheat inventories before next year's harvest will rise 3.3 percent to 202 million tons, and soybean stockpiles will drop 7.7 percent to 63.91 million, according to the Bloomberg survey. Combined inventories of corn, wheat and soy may drop 1.5 percent to 388.7 million tons.

R.J. O'Brien & Associates LLC, a Chicago-based futures broker, asked the USDA yesterday to delay the report until Nov. 14 to allow for account transfers after the collapse of MF Global Holdings Ltd. The USDA said it has no plans to postpone.

Pilgrim's Pride Corp., the second-largest U.S. poultry producer, reported on Oct. 28 a third consecutive quarterly loss, citing higher grain costs. Tyson Foods Inc., based in Springdale, Arkansas, and the largest U.S. meat processor, said in September it paid about $250 million more for grain and feed in its fiscal third quarter that ended July 2.

Gains in corn prices may be curbed should livestock farmers use the slump in wheat to add more of that grain to their feed. Wheat-feed use will rise more than 9 percent to 124.2 million tons this marketing year, the most in about two decades, the London-based International Grains Council estimates.

'Constant Drag'

"Wheat is a constant drag on the corn market," said Dale Durchholz, a senior market analyst at AgriVisor LLC, a consultant in Bloomington, Illinois. "The wheat carryout we're dealing with right now isn't burdensome, but it's more than comfortable."