Small corn surplus likely to keep food prices high

— The U.S. government barely changed its estimate for next year's corn surplus, which is expected to stay small and keep high food prices high.

The Department of Agriculture estimated Friday that farmers will have 848 million bushels of corn on hand at the end of next summer. That's up less than 1 percent from last month's forecast.

Next year's surplus would satisfy demand for fewer than 25 days. A 30-day supply is considered healthy.

Higher corn prices have pushed overall food inflation up this year. Corn is an ingredient in everything from animal feed to cereal to soft drinks. The USDA expects food prices to have increased 4.5 percent in 2011. They estimate prices will rise as much as 3.5 percent next year.

Fears of a corn shortage pushed the price to a record high of $7.99 a bushel in June. Corn prices have eased slightly since then to around $6 per bushel.

Corn traded for about $2 a bushel for several years until 2005. Government mandates and subsidies that year helped the ethanol businesses expand.

The surplus is at historically low levels because of increased demand from ethanol makers and also from livestock producers.

Separately, the USDA said it expected the soybean surplus to be about 18 percent bigger in 2012 than it thought last month. Farmers are expected to have 230 million bushels on hand. That's about a 28 day supply. While not abundant, most traders don't consider that level a shortage, said Jason Ward, an analyst with analyst with Northstar Commodity in Minneapolis.

Soybeans traded for more than $14 a bushel this summer, but now trade around $11.30 a bushel.