May 29 (Bloomberg) -- Wheat and corn prices may be as much as 26 percent higher in a decade than was predicted last year because of increasing demand for food and biofuels, the Organization for Economic Cooperation and Development said.

Wheat is likely to cost $231.60 a metric ton in 2016-2017 and coarse grains such as corn may be at $166.60 a ton, the OECD said in a report produced with the United Nations' Food and Agriculture Organization. They predicted prices of $183.20 and $138.20 in their report a year ago.

``Changing diets, urbanization, economic growth and expanding populations are driving food and feed demand in developing countries,'' the groups said in the report today. ``While smaller than the increase in food and feed use, biofuel demand is the largest source of new demand in decades.''

Wheat, corn, rice and soybeans have climbed to records this year on shrinking global stockpiles and rising demand. The World Bank says 33 nations from Mexico to Yemen may face social unrest after food and energy costs increased for six consecutive years. The spike in prices has already prompted deadly food riots in Egypt, Haiti and Cameroon.

Record oil prices are bolstering demand for alternative fuels, such as ethanol derived from corn or sugar cane. Total use of grains to make ethanol will jump 40 percent to about 98 million tons, 94 percent of it from corn, the FAO said May 22.

Food costs won't drop to the average over the past decade even though output will expand in response to higher prices, the OECD and FAO said. Beef and pork prices may be on average about 20 percent higher in the coming decade than the last one; wheat, corn and milk powder will be 40 percent to 60 percent higher, while vegetable oils will jump by more than 80 percent.

`Faster and Faster'

``We have demand for grains that is growing faster and faster,'' said Nicolas Fragneau, who is setting up an agriculture investment fund at Credit Agricole Asset Management in Paris. ``The market will work and production will increase, but we have to create an entire agriculture investment industry and that takes time.''

Forecasts for rice, which reached a record in April, were increased only slightly through 2010. The report predicted a 10 percent increase in global production, led by India and southeast Asia, with improved varieties and farming.

Some grain prices are already declining. Rice is now 28 percent below its record, while wheat is 44 percent down from the all-time high reached in February.

Rice traded on the Chicago Board of Trade fell for a fourth consecutive trading sessions after Vietnam, the second-largest exporter, said it may resume shipments. Corn, wheat and soybeans also declined.

Wheat Peak

Wheat will probably peak this year at $318.60 a metric ton before declining by 28 percent by 2018, today's report said.

``The underlying forces that drive agriculture product supply will eventually outweigh the forces that determine stronger demand,'' the organizations said.

Corn will slip to $164.60 a ton by 2018 from $181.30 a ton this year as output expands 15 percent. It averaged $113.20 a ton in the past four years, according to the report.

Prices for beef, veal, pig, sheep and poultry, which failed to keep pace with rising costs for grains used to feed animals, may climb as much as 37 percent in a decade, the report said.

Cattle and hog futures in Chicago are little changed this year, compared with a 22 percent advance in the UBS Bloomberg CMCI index of 26 raw materials.

To contact the reporter on this story: Alan Katz in Paris at akatz5@bloomberg.net