Wheat Falls to Five-Month Low as Global Supplies May Gain

Wheat tumbled to a five-month low after a government report showed global inventories will shrink less than forecast, easing concern that droughts from the U.S. to Australia were creating a grain shortage.

Stockpiles will be 176.95 million metric tons on May 31, more than the 174.18 million projected in November, the U.S. Department of Agriculture said today in a report. Analysts expected a cut to 173.61 million, based on 16 estimates in a Bloomberg survey. The agency increased its forecasts on crops in Canada, Australia and China.

Prices have rallied 26 percent this year as drought cuts production in the U.S., Australia and Russia, last year’s largest exporters. While inventories will still be down 9.6 percent from a year earlier, the USDA has increased its forecast for a second straight month. Lower cereal prices helped reduce global food costs tracked by the United Nations 2.2 percent since September.

“Anytime you can alleviate fears about running out of wheat, that’s going to be a little bit bearish and temper the rallies to the upside,” Jason Britt, the president of Central States Commodities Inc. in Kansas City, Missouri, said by telephone.

Wheat futures for March delivery fell 3.2 percent to settle at $8.215 a bushel at 2 p.m. on the Chicago Board of Trade, the biggest drop since Oct. 12. Earlier, the price touched $8.16, the lowest for a most-active contract since July 11.

Production Outlook

Global production will total 655.1 million tons, up 0.6 percent from 651.4 million estimated in November, the USDA said. The Australia forecast was raised to 22 million tons from 21 million. That’s in line with an Australian Bureau of Agricultural and Resource Economics and Sciences estimate on Dec. 4.

Canada’s output will reach 27.2 million tons, the USDA said. That’s up from last month’s forecast of 26.7 million and on par with a Dec. 5 Statistics Canada report. China will reap 120.6 million tons, compared with 118 million projected in November, according to the USDA.

Dry weather is still a concern in the U.S., where winter- wheat crops are entering dormancy before resuming growth in April, Britt said. If prices fall, farmers may seed less and buyers may increase purchases, leaving tighter supplies next year, said Mike Zuzolo, the president of Global Commodity Analytics in Lafayette, Indiana.

Inventories

“If world stocks are smaller than USDA is expecting, a historically tight wheat stocks situation will get even tighter,” Zuzolo said.

Unsold supplies in the U.S. at the end of the marketing year on May 31 will total 20.5 million tons, up from 19.2 million forecast in November, as exports were forecast 4.5 percent lower at 28.6 million tons, the USDA said.

“They cut U.S. exports, and I think that’s deserving,” Tom Leffler, the owner of Leffler Commodities LLC in Augusta, Kansas, said by telephone. “Wheat exports have not performed the way everybody thought they were going to.”

To contact the reporter on this story: Tony C. Dreibus in Chicago at tdreibus@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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