Plunge in corn prices may ease food inflation

The price of corn suffered its biggest fall for 15 years on Thursday, prompting speculation that the high cost of food may start to ease.

Corn prices fell 10% after a US Department of Agriculture report said that farmers were sowing unexpectedly large amounts of the grain.

The price of other crops, including soybeans, also fell on speculation that future stock levels will remain high.

Corn prices recently hit a record, helping to fuel inflation worries.

The report said farmers in the vast crop regions of Iowa and Minnesota had been planting substantially more grain.

Corn futures, which were just under an all-time high of $8 (£5) a bushel at the start of June, finished 9.9% down at $6.29 on Thursday. At one point, the price was down almost 12%.

Wheat futures ended 8.8% down, with soybeans 2.1% lower. The falls continued on Friday, with wheat futures down almost 2% in early Asia trading.

The Agriculture Department report, which said that far more grain acreage was being planted than expected, came despite recent bad weather in the US mid-west.

"There are some big surprises in this report," said Karl Setzer, commodity expert at the MaxYield Cooperative in Iowa.

The report said farmers had planted 92.282 million acres with corn this spring, well above an average trade estimate of 90.767 million acres.

The increase in planting comes as Russia is expected soon to lift a year-long ban on grain exports.

Price delay

More expensive grain has led to food price rises, with everything from meat and cereal to soft drinks costing more in the supermarket.

A huge harvest in August is likely to slow food inflation, which was predicted to rise between 3%-4% this year in the US.

Analysts say it typically takes about six months for changes in commodity prices to feed into retail food prices.

"All of us who perceived tighter [corn] supplies... were proven wrong today," said Jason Ward, an analyst with Northstar Commodity.

However, Mr Ward pointed out that the extra acreage had yet to be harvested and could be damaged by further bad weather.

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Russia rescues Bank of Moscow in record bail-out

The bank's erstwhile head, Andrei Borodin, has fled the country

Russia's fifth largest bank, Bank of Moscow, has been given the biggest bail-out in Russian history.

The $14bn rescue came after another bank, VTB, gained control through a hostile bid, only to uncover bad loans valued at $9bn - a third of the bank's assets.

Bank of Moscow's former head, Andrei Borodin, has fled the country, and a warrant has been issued for his arrest.

The bank was used by ex-Moscow Mayor Yuri Luzhkov to fund property projects.

'Fraudulent lending'

Mr Luzhkov was sacked by Russian President Dmitry Medvedev last year.

In a statement issued in London, Mr Borodin said he was shocked at the size of the bail-out, and claimed that VTB's takeover of the bank was politically motivated.

VTB, for its part, accused Bank of Moscow of committing "fraudulent lending" under Mr Borodin's control, while Russian Finance Minister Alexei Kudrin has called for a criminal investigation.

Under the rescue deal, the Russian central bank will provide a 295bn rouble ($10.6bn) 10-year loan at a negligible interest rate to Bank of Moscow.

Meanwhile, VTB will invest a further 100bn roubles to recapitalise the bank - taking its ownership share from 46% to 75%, enough to qualify for state aid.

VTB, Russia's second-biggest lender, had itself to be rescued by the Russian state to the tune of $6.4bn during the financial crisis.

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