Corn rose to the highest price this week as the government boosted its estimate of demand from U.S. ethanol producers and estimated domestic inventories before the harvest will be smaller than analysts forecast.
The ethanol industry will use 4.55 billion bushels of corn in the year ended Aug. 31, up from a March estimate of 4.5 billion, the U.S. Department of Agriculture said today in report. Production of the fuel additive rose 5.8 percent last week, the biggest gain since December 2010. Corn stockpiles will total 757 million bushels, the USDA said. While that’s higher than last month’s forecast, it was less than the 836 million expected by analysts in a Bloomberg survey.
“Prices are reacting to the jump in ethanol production,” Chad Henderson, the president of Prime Agricultural Consultants Inc. in Brookfield, Wisconsin, said in a telephone interview. “U.S. inventories did not rise as much as most traders were expecting.
Corn futures for May delivery gained 0.7 percent to close at $6.49 a bushel at 1:15 p.m. on the Chicago Board of Trade, capping the first three-day gain since March 21. Earlier, the commodity reached $6.6675, the highest since April 1.
The average U.S. cash-corn price fell 9.2 percent last week after the USDA said on March 28 that inventories after the first two months of the year were 8.1 percent larger than traders expected.
‘‘Farmers have halted sales, and it will take higher prices’’ to secure supplies of corn left from last year’s drought-reduced harvest, Jacquie Voeks, a senior market analyst for Stewart Peterson Group in West Bend, Wisconsin, said in an e-mail.
Corn is the biggest U.S. crop, valued at $77.4 billion in 2012, government figures show. The U.S. is the world’s largest grower and exporter.