SINGAPORE: Chicago wheat futures edged higher on Wednesday after steep losses of more than 3 percent in the previous session, but the modest gains suggest prices will remain under pressure given projections for hefty global stockpiles.
The US Department of Agriculture on Tuesday raised its estimate for US 2012/2013 wheat ending stocks to 754 million bushels, 50 million more than its estimate in November and surpassing market expectations.
The revision reflected slower demand for US wheat and dragged down prices to five-month lows on Tuesday.
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 was up 0.2 percent at $8.23-1/4 per bushel by 0242 GMT. Despite the gain, the price is not far off Tuesday's trough of $8.16, the lowest since July 3.
"In the longer term, wheat will stay under pressure due to the new forecast," said Lynette Tan, analyst at Phillip Futures, who sees price support at around $8.
"The slow pace of exports, particularly for hard red winter wheat, means the US industry will have a larger-than-expected buffer against future production issues. This buffer may prove extremely important given the ongoing drought in the US Great Plains," Luke Mathews, analyst at Commonwealth Bank of Australia, said in a note.
Chicago corn gained 0.4 percent to 7.31 a bushel, after hitting near one-month lows in the prior session in sympathy with wheat.
The USDA kept its US corn stocks estimate at 647 million bushels, the smallest in 17 years, reflecting the impact of the worst drought in half a century earlier this year.
The agency trimmed its estimate of soybean ending stocks by 10 million bushels to 130 million bushels, the lowest in nine years but in line with markets expectations.
Soybeans were off 0.1 percent at $14.70 per bushel.
Grains prices, along with other commodities, could get a further boost later in the session if the US 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 high that the Fed will unveil plans to purchase $45 billion more bonds every month, on top of the $40 billion it announced in September.
Center>Copyright Reuters, 2012
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