Wheat Climbs on Speculation U.S. to Cut Global Supply Estimates

(Businessweek) – Wheat advanced for a second day on speculation that the U.S. may lower its forecasts for global supplies as dry weather damages crops from Russia to Australia.

World wheat supplies before next year’s Northern Hemisphere harvest may be 172.77 million metric tons, down 2.2 percent from last month’s estimate, according to analysts in a Bloomberg survey before the U.S. Department of Agriculture updates its forecast Oct. 11. Russia’s Agriculture Ministry today cut its outlook for the country’s grain exports to 10 million tons, down from a target last month of as much as 14 million tons.

“Fundamentals are still bullish,” said Kieran Walsh, an agricultural derivatives broker at Aurel BGC in Paris. “It would not be entirely unexpected for the USDA report later this week to cut global production outlook, and Russian exports were at the lower end of estimates.”

Wheat for December delivery rose 0.8 percent to $8.6825 a bushel by 7 a.m. on the Chicago Board of Trade. The most-active contract has surged 33 percent this year. In Paris, November-deliver milling wheat increased 0.6 percent to 261.25 euros ($338) a ton on NYSE Liffe.

Russia’s wheat crop, which suffered from drought, may be 40 million tons, down from an earlier forecast of as much as 42 million tons, Agriculture Minister Nikolai Fedorov said today. The USDA currently pegs Russia’s harvest at 39 million tons.

Production in Australia, the world’s second-biggest wheat exporter, may be as small as 21 million tons, Macquarie Group Ltd. analyst Chris Gadd wrote today in a report. In September, the USDA pegged the country’s crop at 26 million tons, while the Australian government estimated output at 22.5 million tons as dry weather eroded yields.

Drought Damage

Corn for December delivery gained 0.4 percent to $7.45 a bushel. Soybeans for November delivery climbed 1 percent to $15.67 a bushel. Both commodities have risen to records in the past two months after drought hurt U.S. yields.

The USDA may cut its outlook for the U.S. corn harvest to 10.616 billion bushels, compared with last month’s forecast of 10.727 billion, according to the Bloomberg survey. Soybean production may be 2.763 billion bushels, up from the previous projection of 2.634 billion, analysts said.

Corn prices may see “a short term bounce” as the USDA may report farmers abandoned acres after drought hurt fields, and strong demand is likely to underpin soybean prices, Gadd said.

“We hold the view that even if U.S. soy production surprises on the upside of expectations, ending stocks will still fall to pipeline levels as China will simply import this increased supply,” he said.

To contact the reporters on this story: Whitney McFerron in London at  wmcferron1@bloomberg.net; Ranjeetha Pakiam in Kuala Lumpur at  rpakiam@bloomberg.net

To contact the editor responsible for this story: John Deane at  jdeane3@bloomberg.net