April 19, 2011

Corn's rising demand from ethanol producers is pushing US inventories to the lowest point in 15 years, a trend that is likely to lead to higher grain and food prices this year.

USDA has left its estimate for corn reserves unchanged from the previous month. The reserves are projected to fall to 675 million bushels in late August, when the harvest begins, or roughly 5% of all corn consumed in the US. That would be the lowest surplus level since 1996.

The limited supply is chiefly because of increasing demand from ethanol makers, which rose 1% to 5 billion bushels. That's about 40% of the total crop.

But the increase didn't alter the agency's overall estimate, mostly because livestock producers are expected to scale back their corn purchases.

The Agriculture Department estimated that demand from livestock producers fell 1% to 5.15 billion bushels.

Crops prices rose about 1% to US$7.67 during morning trading, shortly after the report was released. The price of soybean rose 1% to US$13.80 a bushel. Wheat was virtually unchanged at US$7.76 a bushel.

Corn prices affect most products in supermarkets. Corn is used to feed the cattle, hogs and chickens that fill the meat case, and it is the main ingredient in cereals and soft drinks.