(Bloomberg News) Stockpiles of the biggest crops will decline for a third year as drought parches fields across three continents, raising food-import costs already forecast by the United Nations to reach a near-record $1.24 trillion.

Combined inventories of corn, wheat, soybeans and rice will drop 1.8 percent to a four-year low before harvests in 2013, the U.S. Department of Agriculture estimates. Crops in the U.S., the biggest exporter, are in the worst condition since 1988, heat waves are battering European crops and India's monsoon rainfall already is 20 percent below normal. The International Grains Council began July by forecasting record harvests. It ended with a prediction for a 2 percent drop in output.

The speed of the destruction drove corn prices to a record today and soybean prices to an all-time high last month, while wheat went to a four-year high. For investors, crops are the best-performing commodities this year, and Goldman Sachs Group Inc., Macquarie Group Ltd. and Credit Suisse Group AG say the trend will continue. An index of 55 food items tracked by the United Nations' Food & Agriculture Organization jumped 6.2 percent in July, the biggest increase since November 2009, the Rome-based agency reported today, less than two years after record prices pushed 44 million people into extreme poverty and contributed to uprisings in North Africa and the Middle East.

"People thought we were going to be swimming in corn by the end of the year," said Kelly Wiesbrock, who helps manage $1.3 billion of assets for Harvest Capital Strategies, a San Francisco-based hedge fund. "Then the month of June hit and into July, and it's just been a train wreck."

Top Commodities

Wheat gained 42 percent to $9.275 a bushel this year on the Chicago Board of Trade, soybeans appreciated 35 percent to $16.24 a bushel, and corn rose 28 percent to $8.2625 a bushel, after today touching a record $8.2975. They were the biggest advances in the Standard & Poor's GSCI Spot Index of 24 raw materials, which increased 2.6 percent.

The U.S. drought in June was the widest since December 1956 and the past 12 months were the hottest on record, weather data show. While the USDA anticipated a record harvest as recently as June, it cut the domestic corn forecast by 12 percent on July 11, the most since at least 1990. The estimate will be reduced again when the department reports Aug. 10, according to the average of 29 analyst forecasts compiled by Bloomberg.

The American drought is spreading beyond agriculture into power and fuel production. U.S. nuclear plants' output on July 27 was the lowest for the day since 2001 because water was too hot to be an effective coolant, government data show. Parched conditions will spread into North Dakota and central Texas through October and last across the Midwest, the main growing region, the Camp Springs, Maryland-based Climate Prediction Center said Aug. 2.

Ethanol Mandate

More than 150 lawmakers urged President Barack Obama on Aug. 2 to cut the government mandate for ethanol production, saying high corn costs are hurting livestock producers, food makers and consumers. Ethanol makers including Poet LLC and Archer Daniels Midland Co. back the mandate, as mounting industry losses curbed daily output by 15 percent since the end of December, Energy Department data show.

The lack of rain is also pressuring natural-gas drillers to conserve the millions of gallons of water used in hydraulic fracturing to free trapped gas and oil from underground rock. Environmentalists in Texas are lobbying lawmakers to pass water- conservation laws next year. In Pennsylvania, the Susquehanna River Basin Commission suspended water intake for companies including Talisman Energy Inc. and Chesapeake Energy Corp. on July 16.

South America

The USDA still expects a domestic corn harvest of 329.45 million metric tons this year, the third-biggest ever, and Canada, the world's No. 3 wheat exporter, predicted a 4.1 percent gain in output on July 16. Higher prices also are encouraging more planting in South America. Argentina will reap a record corn crop of as much as 31 million tons, growers group Crea said July 23. Brazil will probably surpass the U.S. as the biggest soybean producer, Sao Paulo-based researcher Agroconsult estimates.