* Ethanol tops livestock as top corn use for first time
* China corn imports largest since 1994/95-USDA
* Wheat crop up 2.3 pct on higher winter wheat yields
* Corn prices up mildly, soy steady, wheat dips (Adds links, trade reaction)
By Charles Abbott
WASHINGTON, July 12 (Reuters) - U.S. corn stocks will languish near 15-year lows for longer than expected as ethanol plants overtake livestock as the biggest consumers of the feed grain and China buys more American corn, according to government forecasts.
The U.S. Agriculture Department, as expected, boosted its forecasts on Tuesday of ending stocks this year and next, largely due to weaker-than-expected consumption by the livestock sector this year. But the revisions fell short of analysts' forecasts and supported prices that have fallen 15 percent from their peak on signs of healthier supplies.
USDA raised its estimate of the U.S. wheat crop by 2 percent from June due to higher yields, especially for soft red winter wheat, but cut the global outlook for next year due to a sharp 3.5 million tonne downgrade in output from Canada where heavy rains delayed planting in the Prairies.
Although the inventory forecasts were lower than analysts' estimates, the report painted a broadly more encouraging picture for global grain supplies next year, albeit with caveats: stocks, particularly of corn, remain too low to bid a final farewell to the kind of food-led inflation that has bedeviled policymakers and stirred discontent this year.
Corn prices at the Chicago Board of Trade rose 1 percent to $6.91 a bushel for delivery this summer. Soybeans were steady at $13.53-1/4 a bushel at mid-morning and wheat was down 1 percent at $6.29 a bushel.
The surprise for traders was upward revisions to 2011/12 demand, including the second-highest Chinese imports, which will prevent inventories from rapidly rebounding.
"The fact that USDA raised new-crop corn usage to offset a good deal of the production increase was our main focus," said Rich Nelson, analyst with Allendale Inc.
USDA said the corn stockpile will bottom out at 880 million bushels in late August, the smallest end stocks since 1996 and 3 percent less than traders expected, but 175 million bushels larger than forecast in June.
With beef production down, USDA cut its estimate of corn for feed by 3 percent for this marketing year while ethanol production is rising.
Graphics-U.S. crops r.reuters.com/rab62s
INSTANT VIEW [ID:nN1E76B09P]
USDA highlights--U.S. soy, wheat, corn [ID:nN1E76B0EI]
ETHANOL BEATS LIVESTOCK AS CORN CONSUMER
Ethanol will become the top corn consumer this year, ahead of livestock for the first time since the home-grown fuel went into large-scale production, USDA estimated. Roughly four of every 10 bushels of corn are used to make ethanol.
Energy Department data indicate output will hit a record 13.7 billion gallons this year, or 9 percent more than mandated, even as analysts expect the government to eliminate some $6 billion in government supports by year-end.
"Larger supplies and improved producer margins" encourage production, said USDA. It boosted its forecast of corn for ethanol by 50 million bushels, or 1 percent, for this marketing year and by 100 million bushels, or 2 percent, for the new year opening Sept. 1.
Centered in the U.S. Midwest, the ethanol industry has bloomed as a home-grown alternative to imported oil and an engine for rural growth. Livestock feeders and foodmakers say it drives up feed costs and indirectly affects grocery prices.
A Senate plan calls for elimination this year of a major ethanol incentive, a 45-cent a gallon excise tax break worth $6 billion annually. Analysts say the other major incentive, a federal guarantee of a share of the motor fuel market, will keep the industry humming although some say output could dip by 5 percent if the tax break is removed.
A record corn crop of 13.47 billion bushels is projected for this year, but full-throttle exports, ethanol production and livestock feeding will use every bushel and leave only 870 million bushels in reserve, a three-week supply when the 2012 crop is ready for harvest. Traders had expected 2011/12 end stocks of 994 million bushels.
CHINA IS BIG CORN BUYER FOR SECOND YEAR
China, the world's largest importer of soybeans and cotton, will import sizable amounts for corn for the second year in a row, said USDA. It says Beijing will buy 1.5 million tonnes of corn in 2010/11 and 2 million tonnes in 2011/12, which opens on Sept 1. The new-crop forecast is up from 500,000 tonnes.
They would be the largest imports by China since 4.2 million tonnes in 1994/95. In most years, China, the No. 2 corn grower in the world, buys only a trickle of corn. Rising domestic demand for meat will make China a regular buyer, say Western analysts. Some expect large sales in 2011/12.
The U.S. soybean stockpile will total 200 million bushels at the end of this summer -- traders expected 198 million bushels -- and 175 million bushels in fall 2012, down 4 percent from trade forecasts, USDA said.
American soybean farmers are forecast to grow 3.225 billion bushels, down 2 percent from USDA's June estimate due to slightly smaller plantings.
USDA boosted its estimate of the wheat crop by 2.3 percent to 2.106 billion bushels, mostly due to "excellent growing conditions" for soft red winter wheat.
In its first estimate of spring-planted wheat, USDA pegged durum at 63.7 million bushels, the smallest crop since 1970, and other spring wheat at 551 million bushels, down 11 percent from last year. (Additional reporting by Roberta Rampton, Christopher Doering, Emily Stephenson in Washington; Karl Plume in Chicago; editing by Jim Marshall)