Grains fell back on both sides of the Atlantic after the US Department of Agriculture raised its forecasts for world corn and wheat inventories, including unexpected raises to American supplies.

Paris wheat eased from a two-year high, and its Chicago peer lost 1.7%, after the USDA boosted its forecast for world stocks of the grain at the close of 2010-11 by 4.2m tonnes to 176.7m tonnes.

The stocks revision included a 230,000-tonne, or 10m-bushel, upgrade to the estimate for American wheat inventories, instead of the 9m-bushel cut forecast by analysts.

For corn, the USDA edged its world stocks estimate 840,000 tonnes higher, including a 130,000-tonne, or 5m-bushel, increase in America's supplies.

Analysts had expected a 21m-bushel cut to the US figure.

Price expectations 

ABN AMRO analyst Charlie Sernatinger said, foreseeing the data as a cue form some liquidation by funds, said of the data: "If it ain't bullish, then it has to be bearish."

Macquarie saw the estimates as "neutral to bearish" for grain prices, but questioned why the USDA appeared to have made no adjustments to account for record ethanol production, which swallows nearly 40% of the American crop.

It also disagreed with a cut to estimates for American exports of hard red winter wheat, as it should be this variety "that sees the bulk of the renewed buying interest" in US grain.

The fresh estimate of 580m bushels, "will eventually increase to 600m-650m bushels on futures reports".

Wheat for March closed 1.7% lower at $7.75 ½ a bushel in Chicago, although its Paris peer sloughed off mid-afternoon losses to end 0.7% higher at E242.00 tonne, if below a two-year high of E244.00 a tonne hit earlier.

March corn also staged something of a comeback, recovering from losses of 1.2% to close flat at $5.60 ¼ a bushel in Chicago.

Better crops

The USDA attributed its lift in the world wheat stocks estimate to bigger crops in countries including Brazil, Canada and Ukraine, and Australia, where the harvest forecast was lifted by 1.5m tonnes to 25.5m tonnes.

Meanwhile the forecast for wheat trading was lower, "as tighter supplies of high quality wheat raise world prices and slow demand in several smaller markets", the USDA said in its flagship Wasde report on global crop supply and demand.

The nudge up in the global corn stocks estimate reflected better hopes for crop in the European Union and, in particular, India, where "the extended monsoon increased late-season soil moisture for the summer crop", bringing production 1.0m tonnes higher than previously expected.