US beancounters are to cut their estimate for world wheat stocks by up to 20m tonnes in a key report on Friday because of adverse weather, investors believe, as reports of crop setbacks continued to buoy prices.

Market watchers contacted by Agrimoney.com were expecting the US Department of Agriculture on Friday to cut between 5m tonnes and 15.5m tonnes – roughly equivalent to Argentina's production - from its estimate for world wheat production in 2010-11.

Some investors are braced for a figure of 20m tonnes, according to Don Roose, president of Iowa-based broker US Commodities.

The revisions to the USDA's benchmark estimates on world crop supply and demand reflect mounting concerns over the impact of weather setbacks to crops in Canada, Europe and the Black Sea, and to a lesser extent Australia.

'Light test weights' 

On Thursday, Romania cut 700,000 tonnes from its forecast for its wheat crop, following torrential flooding since late June which killed at least 20 people, with Bulgaria's harvest also affected.

Analysts at Strategie Grains, the influential analysis group, had expected bumper harvests in the two countries to make up for poorer crops in other European Union countries, such as France, where yields have been affected by drought.

Additionally, Kazakhstan said its total grain crop, which typically comprises roughly 80% wheat, would come in at 14.5m-15.5m tonnes, a fall of up to 30% year on year, reflecting the heatwave which is also damaging crops in neighbouring Russia.

That would imply a large downgrade to USDA estimates, which currently peg the wheat harvest alone at 17.0m tonnes.

Talking their book?

However, one City analyst urged caution over reading too much into the figures, given the interest in wheat exporters of releasing figures which lifted international prices.

Indeed, many analysts urged investors to be cautious in expecting even a deep cut to USDA estimates to boost prices much further, given rallies which have already taken place.

Paris's best traded wheat contract, November, closed up 1.2% at E162.50 a tonne on Thursday, the best finish for a nearest-but-one contract since May last year. The increase took its rally to 15.5% in seven trading days.

London's November lot, now the spot contract, ended 0.3% higher at £118.85 a tonne, also a one-year high.

In Chicago, July wheat jumped 3.5% to $5.34 a bushel, the highest finish for a near-term lot for very nearly six months, and taking above 20% its gain in the last six trading days.

Price fears

"The question is how much of this has already been dialled in to prices," Mr Roose said.

"This may be a case of 'buy the rumour, sell the fact' when the data comes out."

Mr Bos said the price rises "may be a little bit overdone", questioning how much of a threat the dry weather in Europe posed to a crop already nearing maturity.

"If this dryness had come two weeks earlier, we would likely have seen a far bigger problem," he said.