Chicago wheat futures fell on Wednesday to their lowest since July, adding to a loss of more than 3 percent in the previous session, after the U.S. government said it sees hefty stockpiles of the grain amid slower demand.
The U.S. Department of Agriculture raised its estimate for
U.S. 2012/2013 wheat ending stocks to 754 million bushels, or 50 million more than its November estimate, and surpassing market expectations.
The agency also increased its forecast for global wheat
inventories to almost 177 million tonnes, from 174 million in November and well above market projections, following estimates of larger crops from Australia, Canada and China.
The most-traded March wheat contract on the Chicago Board of Trade surrendered modest early gains to hit a session low of $8.09-1/4 a bushel, the weakest since July 3. By 0645 GMT, it was down 1.5 percent at $8.09-1/2.
It was the second day in a row that wheat hit its lowest
since July, having fallen 3.2 percent on Tuesday, when the USDA report was released.
"In the longer term, wheat will stay under pressure due to
the new forecast," said Lynette Tan, an analyst at Phillip
Futures, who sees price support at around $8.
"The slow pace of exports, particularly for hard red winter
wheat, means the U.S. industry will have a larger-than-expected buffer against future production issues," Luke Mathews, analyst at Commonwealth Bank of Australia, said in a note.
"This buffer may prove extremely important given the ongoing drought in the U.S. Great Plains."
Corn and soybeans also edged lower in sympathy with wheat.
Chicago corn slipped 0.2 percent to $7.26-1/4 a
bushel, near Tuesday's trough of $7.23-3/4, which was the lowest in nearly a month.
Soybeans dropped 0.8 percent to $14.60 per bushel.
The USDA kept its U.S. corn stocks estimate at 647 million
bushels, the smallest in 17 years, reflecting the impact of the worst drought in half a century this year.
But the agency trimmed its estimate of soybean ending stocks by 10 million bushels to 130 million, the lowest in nine years but in line with markets' expectations.
Grains prices, along with other commodities, could get a
boost later in the session, if the U.S. Federal Reserve decides to launch more economic stimulus by topping up its monthly bond buying programme in its bid to bring down unemployment.
Expectations are running high that the Fed will unveil plans to buy $45 billion more bonds every month, on top of the $40 billion it announced in September.