Ethanol, China keep US corn supply tight

* Ethanol tops livestock as top corn use for first time

* China corn imports largest since 1994/95-USDA

* Wheat crop up 2.3 pct on higher winter wheat yields

* Corn prices up mildly, soy steady, wheat dips

WASHINGTON, - U.S. corn stocks will languish near 15-year lows for longer than expected as ethanol plants overtake livestock as the biggest consumers of the feed grain and China buys more American corn, according to government forecasts.

The U.S. Agriculture Department, as expected, boosted its forecasts on Tuesday of ending stocks this year and next, largely due to weaker-than-expected consumption by the livestock sector this year. But the revisions fell short of analysts' forecasts and supported prices that have fallen 15 percent from their peak on signs of healthier supplies.

USDA raised its estimate of the U.S. wheat crop by 2 percent from June due to higher yields, especially for soft red winter wheat, but cut the global outlook for next year due to a sharp 3.5 million tonne downgrade in output from Canada where
heavy rains delayed planting in the Prairies.

Although the inventory forecasts were lower than analysts' estimates, the report painted a broadly more encouraging picture for global grain supplies next year, albeit with caveats: stocks, particularly of corn, remain too low to bid a
final farewell to the kind of food-led inflation that has bedeviled policymakers and stirred discontent this year.

Corn prices at the Chicago Board of Trade rose 1 percent to $6.91 a bushel for delivery this summer. Soybeans were steady at $13.53-1/4 a bushel at mid-morning and wheat was down 1 percent at $6.29 a bushel.

The surprise for traders was upward revisions to 2011/12 demand, including the second-highest Chinese imports, which will prevent inventories from rapidly rebounding.

"The fact that USDA raised new-crop corn usage to offset a good deal of the production increase was our main focus," said Rich Nelson, analyst with Allendale Inc.

USDA said the corn stockpile will bottom out at 880 million bushels in late August, the smallest end stocks since 1996 and 3 percent less than traders expected, but 175 million bushels larger than forecast in June.

With beef production down, USDA cut its estimate of corn for feed by 3 percent for this marketing year while ethanol production is rising.

source: reuters