Chicago | Reuters — U.S. wheat futures set contract highs on Thursday as the U.S. Department of Agriculture (USDA) slashed its production forecast for the variety that is grown in the U.S. Plains and used to make bread.
USDA, in a monthly crop report, projected hard red winter wheat output at 590 million bushels, down from its April estimate of 749 million and below analysts’ expectations for 685 million.
Hot weather has stressed the crop, with drought affecting about 69 per cent of U.S. winter wheat areas as of May 3, according to separate government data.
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U.S. wheat futures closed higher on Thursday on concerns over the limited availability of supplies for export in Russia, analysts said.
Traders are keeping a close eye on global grain production as supplies tightened due to crop shortfalls and Russia’s invasion of Ukraine, a major wheat and corn exporter.
USDA’s cut to hard red winter wheat output is “indisputably bullish,” ED+F Man Capital analyst Charlie Sernatinger said.
Chicago Board of Trade July soft red winter wheat climbed 65-3/4 cents to close at $11.78-3/4 a bushel and reached its highest price since March 9 (all figures US$).
K.C. July hard red winter wheat ended up 69-1/2 cents at $12.70 a bushel and set a contract high. MGEX July spring wheat ended up its daily 60-cent limit at $13.16 a bushel and also reached a contract high.
“Wheat is the feature today with U.S. old- and new-crop stocks clocking in below expectations, along with new-crop world wheat stocks,” said Rich Feltes, head of market insights for broker R.J. O’Brien.
In other markets, CBOT July soybeans finished seven cents higher at $16.13-3/4 a bushel and July corn edged up three cents to $7.91-1/2.
Traders said they were surprised USDA cut its estimate for U.S. corn yields to 177 bushels per acre, down four bushels from February. The agency cited slow springtime plantings.
“I was shocked that USDA cut its corn yield,” said Arlan Suderman, chief commodities economist for broker StoneX. “I thought they would do it in June and not in the May report.”
— Reporting for Reuters by Tom Polansek in Chicago; additional reporting by Julie Ingwersen in Chicago, Gus Trompiz in Paris, Naveen Thukral in Singapore and Hallie Gu in Beijing.
