WASHINGTON — As demand for ethanol zooms higher, Kansas corn farmer Ken McCauley expects higher prices for his crop.

"That's kind of the story across the country," said McCauley, who grows corn and soybeans in northeast Kansas. "There's a lot more buyers out there because of these ethanol plants and other ways to use the corn."

The amount of corn used to make ethanol should increase by 34 percent over last year's use to 2.15 billion bushels, the department said Friday in its monthly crop report.

Meanwhile, the nation's soon-to-be-harvested winter wheat crop is on track to be the smallest since 2002, analysts said. Farmers are expected to produce 1.32 billion bushels of winter wheat, down 12 percent from last year.

Drought in Texas, Oklahoma and throughout the central and southern Great Plains has dramatically reduced yields, which should average 42.2 bushels an acre, down two bushels from last year, the report said. Wheat prices should be $3.50 to $4.10 a bushel, up from $3.42 last year.

For corn, demand from ethanol plants as well as from foreign countries improved the price forecast to $2.25 to $2.65 a bushel, compared with last year's $1.95 to $2.05.

Demand has risen so sharply, the amount of corn in storage is expected to drop to half of last year's levels, the department said.

"That's really good news," said McCauley, who farms nearly 4,000 acres with his son. "The more corn you have on hand, the less prices will go up."

He sends his corn to a co-op that makes food and will begin producing ethanol this fall. He's an owner of the co-op.

Ethanol is gobbling about 20 percent of the nation's corn crop, up from 5 percent a couple of years ago, said Keith Collins, the department's chief economist. He added that demand for biodiesel, made from soybeans, is forcing prices for soybean oil higher.

"Ethanol and biodiesel have become a modern commodity market phenomenon," Collins said in a release.