"We view physical fundamentals in corn as extremely tight," Lewis of Deutsche Bank said in a special report on corn. "Inventory to use ratios are precariously low, Chinese shortages are rising and the US ethanol industry is absorbing an increasing share of the U.S. corn harvest."

Lewis said that global corn inventories are currently equivalent to just 57 days of consumption -- close to its lowest levels since the mid-1970s.

Meanwhile, he expects demand for corn as a feedstock for the ethanol industry to continue to grow, citing the U.S. Environmental Protection Agency's approval of the raising of the blend of ethanol in gasoline to 15% from 10% as one reason. Previously, this increase was limited to cars and light trucks less than three years old, affecting merely 18% of the U.S. car fleet. This year, Lewis expects the EPA to extend this increase to car and light truck models up to ten years old, affecting more than 50% of the U.S. car fleet.

The analyst also noted that another somewhat bullish trend for corn is China's deteriorating agricultural trade position. The country's largest agricultural imports have been for soybeans and cotton, but recently it has also begun to import corn -- though in small volumes.

The price rallies in corn could significantly exceed historical averages, the analyst predicted.

"We would view attempts to secure food supplies via export bans as the main hazard in 2011 as such measures have typically encouraged price spikes across the sector," he added in a weekly commodities report.

In a Feb. 13 report, Morgan Stanley analyst Hussein Allidina noted that corn ended last week up 4.1% week-over-week after the U.S. Department of Agriculture again raised its estimates for U.S. ethanol production. In another report, the analyst said that two weeks ago corn led the space higher on strong weekly ethanol production numbers and rumors of Chinese buying.

Battle Creek, Mich.-based Kellogg ( K) recently raised prices to help offset rising ingredient costs.

In its recent earnings report, the maker of Corn Flakes cereal, Cheez-It crackers and Famous Amos cookies said it plans to raise prices again in 2011 in a range of 3% to 4%.

The company and its subsidiaries are engaged in the manufacture and marketing of ready-to-eat cereal and convenience foods.

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