Wheat futures fell after Australia raised its forecast for domestic production, ending a two-week rally spurred by persistent rainfall that threatens to erode the nation’s crop quality.
The Australian government said output may reach a record 26.8 million metric tons because of favorable growing conditions early in the season. After the wettest September-to-November period ever, prices in Chicago rose 16 percent over two weeks through yesterday. Global supplies have dwindled as drought cut output in Russia and Eastern Europe this year.
The Australian forecast “took the wind out of our sails a little bit, but the market is focused on the quality of the wheat, not necessarily just quantity,” said Shawn McCambridge, the senior grain analyst for Prudential Bache Commodities LLC in Chicago.
Wheat futures for March delivery slipped 8.25 cents, or 1 percent, to settle at $7.8475 a bushel at 1:15 p.m. on the Chicago Board of Trade, the first drop since Nov. 23. Earlier, the price reached $8.11, the highest since Aug. 6. The commodity has surged 63 percent since the end of June.
The U.S. is currently the world’s largest exporter, followed by France, Canada and Australia, according to estimates by the International Grains Council and FranceAgriMer.
More Rain Forecast
As much as 10 centimeters (3.9 inches) of rain were forecast for growing regions from South Australia to Queensland in the four days ending Dec. 10, according to the country’s Bureau of Meteorology.
Commonwealth Bank of Australia said on Dec. 5 that as much as 35 percent of the harvest in Queensland, New South Wales and Victoria is at risk of being classified as feed-quality after wet weather.
Today, Moscow-based researcher SovEcon raised its estimate for Russian wheat production to 33 million tons in 2011 from 28.2 million this year after warm, wet weather in November boosted winter crops.
Drought cut Russia’s grain crop by 38 percent this year, and the country may extend an export ban in place through July 1, SovEcon said.
“Exportable global supplies are still extremely tight,” and the market may rally should Russia extend its ban, said Mike Zuzolo, the president of Global Commodity Analytics & Consulting in Lafayette, Indiana.
On Dec. 10, the U.S. Department of Agriculture may cut its forecast for worldwide inventories to 171.3 million tons, according to a Bloomberg News survey of 17 analysts. Last month, the agency predicted stockpiles as of May 31 would total 172.51 million tons.
Wheat is the fourth-biggest U.S. crop, valued at $10.6 billion in 2009, behind corn, soybeans and hay, government data show.