Global production of wheat and rice will reach record levels this year as farmers respond to high prices and strong demand, according to the US Department of Agriculture, which on Friday published its first forecasts for US and global agricultural output and stocks in 2008-9.

The world will produce a record 656m tonnes of wheat in the year starting in July, up 8.2 per cent on the previous year, but this may not be enough to restore a comfortable supply buffer to the world market. Global wheat stocks have shrunk to their lowest level since 1978 and a limited recovery is forecast this year, with inventories expected to rise 13 per cent to 124m tonnes.