Record wheat stocks offset South American drought

World wheat stocks will swell to record size this year and corn stocks will be larger than expected despite severe drought in South America, the U.S. government forecast on Thursday.

India will post a record rice crop due to a strong monsoon this year as the global grain outlook improves slightly after years of tight stocks and rising prices.

U.S. traders said the report from the U.S. Department of Agriculture was not likely to excite futures markets.

"There isn’t anything here to zip this market on up and, given that we’re at the upper range of trading ranges, we’ll probably fall back a little," said Jack Scoville, an analyst at The Price Group in Chicago.

"Wheat is the stronger number of the bunch but there’s isn’t anything to blow your socks off."

USDA increased world wheat ending stocks by 1.5 per cent to a record 213.1 million tonnes from its January estimate.

For the second month in a row, USDA lowered its forecast of the soybean harvest in Brazil and Argentina, and cut Argentine corn for the second time since January. But the cuts were largely in line with traders had been expected as drought continues to ravage agriculture output.

Argentina’s corn crop was forecast at 22 million tonnes, down 4 million tonnes from the January estimate. Soybeans were forecast at 48 million tonnes, down 2.5 million tonnes in a month.

"High temperatures and extensive dryness… resulted in irreversible damage to early corn," said USDA. Traders had expected a lower corn figure and a slightly higher soybean estimate for Argentina.

In Brazil, the world’s largest soybean exporter, the crop will total 72 million tonnes, down two million tonnes from January’s estimate, said USDA.

Drought losses will curtail corn and soybean exports from South America, bolstering U.S. sales, said USDA.

U.S. corn exports were forecast for 1.7 billion bushels this marketing year, up three per cent from a month ago. U.S. end stocks would fall to 801 million bushels, a three-week supply, when the new crop is ready for harvest.

USDA will release its first projections of the new crops on Monday as part of a 10-year "baseline" that is based on conditions in late 2011.

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