By Sam Nelson

CHICAGO (Reuters) – America’s supply of corn is expected to keep shrinking as offtake from ethanol makers expands, dropping the 2010/11 supply to its lowest in 15 years even as use for feed and export stabilizes or wanes.

“Ending stocks will have declined in eight of the past nine months as higher ethanol usage, offsets lower feed usage and lower exports,” said Rich Nelson, an analyst for Allendale Inc.

USDA early Wednesday will release its February supply/demand and world production reports and an average of analysts’ estimates pegged this season’s ending supply at 728 million bushels.

That is down nearly 43 percent from the ending stocks of 1.708 billion last year (2009/10), below the outlook in January for 745 million, the lowest stockpile and lowest stocks-to-use ratio in 15 years.

The stocks to use ratio would drop to 5.4 percent nearing the low of 4.98 percent in the 1995/96 marketing year, following a drought that slashed production.

The 2010/11 crop marketing year will end on August 31.

Chicago Board of Trade corn futures prices are hovering near 30-month highs due to the huge demand for feedgrains and shrinking supplies as global use for food and fuel continues to soar. The escalating price of food has led to widespread protests in several nations.

Previously in its January report, USDA forecast the amount of corn to be used this season to make ethanol at 4.9 billion bushels or about 40 percent of last year’s U.S. corn production and up from the December estimate of 4.8 billion.

Bryce Knorr, editor for Farm Futures Magazine, said ethanol could be the surprise.

“Ethanol production through the end of January looks like it’s going to be stronger than USDA estimates, even adjusting for the higher efficiency processors are realizing from higher quality 2010 corn,” he said.

(Reporting by Sam Nelson; additional reporting by Julie Ingwersen, Mark Weinraub, Karl Plume, Mike Hirtzer, Suzanne Cosgrove; Editing by Lisa Shumaker)

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