The latest forecast for U.S. wheat production got a boost Tuesday with bigger estimates for spring and durum, but global supplies are still expected to remain at their lowest level since the 2016-17 marketing year, according to USDA's World Agricultural Supply and Demand Estimates report.

USDA, in its first survey-based forecast this year, put production of hard red spring wheat at 457 million bushels, up from 297 million last year during drought conditions. The forecast for white wheat this year is 77 million bushels, up from just 37 million last year.

Craig Turner, a senior commodities broker with StoneX Financial Inc., called the latest WASDE report “bearish” after wheat futures dropped by 45 cents. Corn and soybean futures prices also dropped, he said.

“Traders are concerned about lower commodity demand as central banks raise interest rates to fight inflation, which could bring on a recession,” he said.

A bigger factor than WASDE in the futures market is a wave of selling by index funds that are trying to dump food and energy commodities, says Arlan Suderman, chief commodity analyst for the StoneX Group. Index funds that serve long-term investors were “heavy liquidators – much heavier that what you would normally see this time of year,” he said.

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On the global market, USDA says the outlook for wheat supplies is low despite higher production forecasts in the U.S. and Russia. USDA lowered its production forecasts for Ukraine and the European Union by 2 million metric tons apiece.

In the EU, the problem for wheat production is mostly dry weather, pushing down yields. In Ukraine, the problem is mostly the Russian invasion. Much of the most productive land used to grow winter wheat is in the east of the country where the fighting is the worst.

In the U.S., the latest WASDE was also bearish for corn. USDA raised its estimates for both beginning and ending stocks and boosted its forecast for production by 45 million bushels. The USDA is now predicting corn production this year will reach 14.505 billion bushels, up from an earlier forecast of 14.46 billion bushels.

Suderman downplayed the impact of the July WASDE, calling it mostly “tweaks,” and stressed that the biggest factor ahead for corn is the weather.

“What really matters going forward … is what is the weather going to do in the next three to five weeks,” he said. “That’s ultimately going to have a much bigger impact than anything in today’s report.”

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