Oil report

UPDATE 1-U.S. wheat harvest falls below forecasts; prices rally

(Recasts, updates with U.S. wheat production data, price reaction)

CHICAGO, Sept 30 (Reuters) -

The 2022 U.S. wheat harvest was smaller than previously forecast as dry soils in western growing areas cut into yields and caused heavy crop abandonment, the government said on Friday.

Chicago Board of Trade wheat futures surged 3% to their highest since July 11 as traders adjusted positions to reflect the lowered production view.

“People all summer long, and really fall, have been saying the wheat crop was awful,” said Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage. “This is a confirmation of what everybody has been saying, but they didn’t want to believe it was that bad.”

Wheat stocks remained slightly higher than a year ago, the U.S. Agriculture Department said, but supplies remained tight at a time when export disruptions stemming from Russia’s invasion of Ukraine have left buyers scrambling to find grain, the government said on Friday.

In its annual Small Grains Summary report, USDA pegged the U.S. wheat crop at 1.650 billion bushels. That compares with market forecasts for 1.778 billion bushels, according to the average of analyst’ estimates in a Reuters poll. The government had estimated wheat production of 1.783 billion bushels in August.

Domestic stocks of wheat stood at 1.776 billion bushels on Sept. 1, according to USDA’s Quarterly Stocks report. That was up from 1.774 billion bushels a year earlier and in line with trade forecasts. (Additional reporting by Tom Polansek)