DB Agriculture Commodity ETF (DBA)

[olivernoyes]

US corn reserves expected to fall to 15-year low

Corn reserves projected to fall to 15-year low, a trend that could lead to higher food prices

On Friday April 8, 2011, 10:40 am EDT

ST. LOUIS (AP) -- Rising demand for corn from ethanol producers is pushing U.S. reserves to the lowest point in 15 years, a trend that could lead to higher grain and food prices this year.

The Agriculture Department on Friday 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 percent of all corn consumed in the United States. That would be the lowest surplus level since 1996.

The limited supply is chiefly because of increasing demand from ethanol makers, which rose 1 percent to 5 billion bushels. That's about 40 percent 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 percent to 5.15 billion bushels.

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