updated 5/12/2006 9:30:22 AM ET 2006-05-12T13:30:22

Escalating demand for ethanol will push corn prices higher this year, the Agriculture Department said Friday.

The amount of corn used to make ethanol should increase by 34 percent over last year's use to 2.15 billion bushels, the department said in its monthly crop report.

Meanwhile, the nation's soon-to-be-harvested winter wheat crop is on track to be the smallest since 2002, analysts said. Farmers are expected to produce 1.1 billion bushels of winter wheat, down 12 percent from last year.

Drought in Texas, Oklahoma and throughout the central and southern Great Plains has dramatically reduced yields, which should average 42.2 bushels an acre, down 2 bushels from last year, the report said. Wheat prices should be $3.50 to $4.10, up from $3.42 last year.

For corn, demand from ethanol plants as well as from foreign countries improved the price forecast to $2.25 to $2.65 a bushel, compared with last year's $1.95 to $2.05.

Demand has risen so sharply, the amount of corn in storage is expected to drop to half of last year's levels, the department said. Farmers should harvest 10.55 billion bushels of corn, a 5 percent drop from last year.

Also in the report:

  • Analysts said the rice crop will be 205 million hundredweight, a drop of 18.2 million hundredweight over last year.
  • Soybean production is estimated to be 3.08 billion bushels, down 6 million bushels from last year.
  • Sugar supplies are projected to fall to 11.5 million short tons, down from 11.9 million last year.
  • The department reduced its expectations for meat production, saying beef, pork, chicken and turkey should increase by around 2 percent next year.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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