US wheat futures closed more than 2 percent higher on Thursday after the US government cut its forecast of world wheat production more than expected, and soybeans and corn followed wheat higher despite forecasts for record US crop yields. Chief support came from the US Department of Agriculture August report that slashed world wheat production by 2.3 percent to 645.73 million tonnes, in line with other recent estimates but a more drastic cut than traders expected.
The lower forecast follows a record drought in Russia, crop troubles in other Black sea regions, flooding in Pakistan and worries about too much rain on Canadian farm fields, all of which had aided a near doubling in US wheat prices to a two-year high touched last week.
Chicago Board of Trade September wheat futures climbed as high as $7.34-1/2 Thursday though the nearby contract ended up 18-1/4 cents at $7.13. December ended up 18-3/4, or 2.6 percent, at $7.43-3/4. "They did drop the (global wheat) numbers a little bit more than expected," said Allendale Inc analyst Rich Nelson.
Wheat price gains were aided by better-than-expected weekly export sales of 1.35 million tonnes, above estimates for 800,000 to 1 million tonnes. CBOT corn and soybean futures raced higher as well, buoyed by the rally in wheat in active fund buying. CBOT September corn ended up 10-3/4 cents at $4.06-1/4 a bushel and new-crop December closed up 10-3/4 cents at $4.21-3/4.
The gains came even though the USDA forecast a record large US corn crop for 2010. US soybean futures got added support from better-than-expected weekly export sales. CBOT August beans ended up 12-1/2 cents at $10.57 per bushel, while new-crop November soybeans ended up 13 cents at $10.28-1/2.
HEFTY HARVEST IN US The tighter global production picture for wheat painted by the USDA contrasts with unexpectedly strong production forecast in the United States, which will be expected to fill any global deficit.
The USDA pegged the 2010/11 US all wheat crop at 2.265 billion bushels with a record yield of 46.9 bushels per acre, helping maintain world wheat stocks about 40 percent above the crisis levels seen in 2007/08. The agency lowered its forecast for world wheat ending stocks to 174.8 million tonnes, 50 million tonnes more than two years ago when food supply fears gripped the world. With the pivotal US report out of the way, attention will refocus on conditions in the Black Sea, where the worst drought in over a century shows no sign of immediate respite.