Wheat falls from record after US cuts output loss

Wheat plunged from a record as the US government forecast a drop in global production that was less than analysts expected.

The world probably will harvest 606.24 million tonnes of wheat by May 31, down 0.7 per cent from last month's forecast, the US Department of Agriculture said. Australia's crop will be 21 million tonnes, down from an August forecast of 23 million tonnes, the USDA said. Some analysts had forecast Australia would produce as little as 15 million tonnes.

"We were looking for some downsizing in world production," said Tom Leffler, owner of Leffler Commodities LLC in Augusta, Kansas. "The big surprise to me was that people were putting Australia down there to 15 million tonnes. It's still early enough rain could make a big difference."

Wheat for December delivery fell 30 cents, or 3.4 per cent, to $8.605 a bushel on the Chicago Board of Trade, after earlier reaching a record high of $9.1125 in overnight trading. The 30-cent decline was the maximum permitted for one day on the exchange.

The most-active contract still has more than doubled in the past year, as drought hurt crops in Australia and Canada and excessive rain damaged plants in the US and Europe.

Australia, which the USDA forecast will be the world's second-largest exporter of wheat next year at 15 million tonnes, produced just 9.9 million tonnes last year after drought devastated the crop. Dry weather has again diminished crop prospects this year. Still, with more than a month before harvest, precipitation may improve yield potential. "I'd be cautious about writing Australia off," Leffler said.

Egypt, the world's second-biggest importer of wheat behind Brazil, today bought 27,000 metric tonnes of the grain after saying yesterday it sought at least 55,000 tonnes, according to two traders involved in the tender.

Wheat also may be falling on expectations that record prices will encourage the world's farmers to plant more of the grain, increasing supply. Wheat can be grown in nearly every region of the world, and after this year's rally, planting is sure to increase, Leffler said.

"We're going to plant wheat all over the world. When higher prices show up, people want back in the game." Speculative traders also may be selling futures contracts in a bet that the rally is over, Leffler said.