U.S. corn futures are expected to begin Wednesday's day session sharply higher, buoyed by tight supply outlooks from federal forecasters.

Analysts expect corn to open 15 cents to 30 cents higher.

The U.S. Department of Agriculture January crop updates are supportive and opening calls reflect that bullish attitude. The tight supplies will promote a supportive day for prices as the market has to make sure that it acutely slows demand and raises prices to entice farmers to plant enough acres in 2011 to rebuild inventories from precariously tight projected levels.

The U.S. Department of Agriculture lowered its projection for the U.S. corn end of year supplies 70 million bushels to 675 million.

The report is supportive for corn prices, encouraging to market bulls looking for confirmation of smaller inventories, analysts said.

Corn inventories were down from a January estimate of 745 million bushels and well below prior-year ending stocks of 1.708 billion bushels. Estimates ranged from 645 million to 795 million bushels. Only one estimate was below 700 million bushels.

The further tightening of end-of year inventory projections reflects a situation where the rationing of demand has not occurred at current price levels, said Jason Roose, analyst with brokerage U.S. Commodities in West Des Moines, Iowa.

Tight supply projections have fueled the U.S. corn market for months, and the USDA has estimated corn supplies as a percentage of usage this year will dip to 5.0%, matching the record tight ratio in 1995/96, analysts at Doane Advisory Service wrote in a market note. Disappointing crops around the world and relentless growth in demand have kept supplies tight.

U.S. corn used for ethanol was raised 50 million bushels to 4.950 billion bushels, USDA reported in Wednesday's reports. Strong demand for corn from the ethanol industry remains a draw on corn inventories.

Traders and analysts had expected the USDA would most likely drop its ending stocks forecast due to strong demand for ethanol.

More than one-third of the U.S. crop goes to ethanol. While ethanol producers are facing higher corn costs, those have been largely offset by rising gasoline prices that have helped keep ethanol blending economics favorable. In January the USDA projected 4.9 billion bushels of corn would be used for ethanol.

Turning abroad, the USDA trimmed its output forecast for Argentina, the world's second-largest corn exporter after the U.S., by 6% to 22 million tons due to damaging heat and dryness. A smaller crop in South America is expected to shift more demand to the U.S.

USDA estimated world corn ending stocks at 122.51 million metric tons, down from 127 million reported in January.