Wheat hits new highs as USDA stokes world supply worries

The USDA reduced its estimate of US wheat production to a 19-year low due to adverse weather. (Shutterstock)

• Paris wheat at new contract highs, CBOT wheat at new 3-month top
• USDA's steep world supply cuts fuelled rally in wheat market

PARIS/SINGAPORE: US and European wheat futures extended gains on Friday, led by fresh contract highs in Paris, after steep cuts to world supply in a US government report fueled concern about dwindling availability in major export zones.
Corn and soybeans edged up as investors assessed the US Department of Agriculture’s sharper than expected reductions to US yields against the agency’s lower demand projections.
In its widely followed monthly crop outlook on Thursday, the USDA surprised the market by slashing projected world wheat supplies, notably due to a combined 20 million ton cut to expected production in Russia and Canada. The USDA also reduced its estimate of US production to a 19-year low due to adverse weather.
“The market found a new factor of tension with the strong cuts to production in the main exporting countries,” consultancy Agritel said of the USDA report.
The most-active wheat contract on the Chicago Board of Trade (CBOT) was up 1.4 percent at $7.64-1/4 a bushel by 11:11 a.m. GMT, near an earlier three-month peak. Euronext futures showed sharper gains, drawing additional strength from weak milling quality in a rain-hit French harvest. December wheat on Euronext was up 2.7 percent at a new life of contract high of 255.50 euros ($300.16) a ton.
Grain group Soufflet said on Thursday only about a third of soft wheat it has collected so far in France was meeting a key milling standard. CBOT corn was up 0.2 percent at $574.50 a bushel, while soybeans added 0.9 percent to $13.53-1/2 a bushel.
Corn had rallied on Thursday on the USDA’s reduced forecast for US yields, although as in soybeans the USDA trimmed demand projections. The export outlook for US soybeans has been clouded by signs of slowing Chinese demand. However, analysts still see global supplies remaining relatively tight.
“Modest demand rationing — especially in soy — may deliver a softer landing for G&O (grains and oilseeds) supplies, but it will be tough to materially raise carry-out (stocks) over the next year or two, raising prices risks for consumers across the board,” Rabobank said in a note.