Traders said the data was bullish for corn prices which are already riding high on soaring global demand. Corn was expected to open 15 to 20 cents a bushel higher in Chicago futures trading on the shrinking ending stocks.

In a monthly update, the Agriculture Department estimated 675 million bushels of corn will remain in grain bins when this year's crop is ready to harvest, the smallest carry-over since 426 million bushels in 1995-1996. In both cases, it would be a 2-1/2 week supply or a 5 percent stocks-to-use ratio.

"Not only did they pick up on ethanol demand but high fructose corn syrup — they are talking about that, too," said Jack Scoville, analyst with The Price Futures Group. "It's a good tight estimate and I think we'll see some pretty strong reaction."

Traders had expected USDA to cut the end-stocks forecast by 7 percent, to 729 million bushels. Corn futures prices have been running at near-record highs, fueled by concern that rising demand for grain would outpace production around the world. A United Nations food-price index hit a record high in January.

Some 4.95 billion bushels of corn, or 40 percent of the crop, will be used to make ethanol during the marketing year that ends on Aug. 31, up 50 million bushels from the previous estimate, USDA said. It would be the largest corn-for-ethanol total yet.

Ethanol output was at record-high levels in December and January, USDA said, and export demand is high.

"Corn costs for many ethanol producers and other end users may also be below spot values to date as a substantial portion of this year's crop appears to have been forward priced," said USDA, suggesting that ethanol makers may not feel the effect of rising prices.

More corn also will be used to make high fructose corn syrup, USDA said, pointing to strong shipments of the sweetener to Mexico. An upturn in industrial production will boost demand for starch from corn, said USDA. It allotted an additional 20 million bushels for HFCS and starch.

World corn stocks will drop by 3.5 percent, or 4.5 million tonnes (metric tons), to 122.5 million tonnes, USDA said, due to smaller stockpiles in the United States and Brazil. USDA cut its estimate of Argentine corn production by 1.5 million tonnes, to 22 million tonnes, due to drought.

USDA left unchanged its soybean end-stocks estimate at 140 million bushels and wheat end-stocks at 818 million bushels. Traders also saw those estimates as bullish, calling wheat futures up 10-12 cents per bushel and soybeans up 8-10 cents.