Wheat prices slumped 6% after the US lifted by 7.8m tonnes its estimate for world supplies of the grain, boosted by forecasts of larger domestic stocks and the best harvest in Kazakhstan for 30 years.
The US Department of Agriculture, in its much-watched Wasde report, hiked to 202.4m tonnes its forecast for world wheat stocks at the close of 2011-12, the highest figure for 10 years.
The upgrade reflected in part a controversial downgrade to use of the grain by livestock farmers, helping lift the figure for America’s own year-end stocks by 2.1m tonnes.
However, the USDA also highlighted better hopes for output in Australia, which was raised by 1.0m tonnes to 26.0m tonnes after September rains boosted crop prospects.
The estimate of the Kazakhstan crop was boosted by 3.0m tonnes to 19.0m tonnes, nearly double that last year, when the country suffered, with Russia and Ukraine, from drought.
"Producers across the globe have really responded well to higher prices," Sal Gilbertie, president of Teucrium Trading, told Agrimoney.com.
"There would seem to be adequate supplies of wheat."
Indeed, with the grain’s stocks-to-use ratio – a measure of the availability of supplies and therefore of price potential – increasing to a lax 30%, meaning the world has almost four months of consumption in reserve, the data was viewed a negative for prices.
"The global wheat carryout estimate of 202m tonnes adds to the bearish tone of the wheat market," Minneapolis-based broker Benson Quinn Commodities said.
In Paris, consultancy Offre & Demande Agricole termed the data "clearly bearish".
Chicago wheat futures for December tumbled to $6.21 ¾ a bushel in early live deals before recovering a little ground to close at $6.26 ¾ a bushel, down 5.2% on the day.
Paris wheat for November finished 3.1% lower at E185.75 a tonne, with London November wheat down 2.4% at £147.70 a tonne.
‘Near-perfect summer weather’
The upgrade to the Kazakh estimate was attributed to "harvest results that confirm the impact of abundant moisture and near-perfect summer weather on this year’s crop".
Indeed, with virtually none of the crop irrigated, "yield can fluctuate sharply from year on year, depending on the weather", USDA analyst Mark Lindeman said.
The USDA also edged higher, by 540,000 tonnes to 136.3m tonnes, its estimate for the newly-finished European Union wheat harvest, reflecting improved ideas of French and Hungarian production.