Wheat futures fell the most in three weeks after a government report showed increasing U.S. and global stockpiles.
Worldwide inventories will be 176.72 million metric tons by May 31, up 2.4 percent from last month’s estimate, the U.S. Department of Agriculture said today. Stockpiles were higher than any of the forecasts in a Bloomberg News survey of 17 analysts. The USDA raised its crop estimate for Australia by 6.3 percent, even after heavy rains threatened output.
“We had been looking for ending stocks to come in lower last month, and then USDA increased it,” said Brian Hoops, the president of Midwest Market Solutions in Yankton, South Dakota. “We had been rallying on supply fundamentals, and now we’re pulling back a little today, which is justified because the report didn’t include any production losses in Australia.”
Wheat futures for March delivery fell 13 cents, or 1.6 percent, to settle at $7.755 a bushel at 1:15 p.m. on the Chicago Board of Trade, the biggest drop since Nov. 16. Earlier, the price gained as much as 1.2 percent. The grain declined 0.4 percent this week.
The commodity has jumped 61 percent since the end of June as drought hurt crops in Russia and dry weather in the U.S. Great Plains threatened winter crops.
Rains this month followed Australia’s wettest September-to-November period on record, according to the country’s Bureau of Meteorology. The USDA raised its forecast for Australia’s wheat production to 25.5 million tons, while also cutting its projection for the country’s exports by 6.3 percent.
The U.S. currently is the world’s largest wheat exporter, followed by France, Canada and Australia, according to estimates by the International Grains Council and FranceAgriMer.
Favorable weather early in eastern Australia’s growing season spurred the country to boost its domestic-production forecast to a record 26.8 million tons on Dec. 7.
The impact of recent rains, which delayed harvesting and cut crop quality, won’t be known until more of the harvest is completed in the south, the Australian Bureau of Agricultural & Resource Economics & Sciences said.
“The USDA was stuck between a rock and a hard place coming into this report” after the Australian government “surprisingly lifted its national estimate,” Luke Chandler, Keith Flury and Erin FitzPatrick, analysts at Rabobank International in London, said today in a report. “Both the ABARE and USDA estimates are too high and in fact moving in the wrong direction.”
As much as 10 million tons of Australia’s crop may be downgraded to feed wheat, and harvests are running up to a month behind normal, Rabobank said.
U.S. inventories at the end of May will be 858 million bushels (23.4 million tons), up 1.2 percent from the November estimate, the USDA said. Analysts expected 842.3 million.
Wheat is the fourth-biggest U.S. crop, valued at $10.6 billion in 2009, behind corn, soybeans and hay, government data show.