Wheat prices bounced 5% after US officials cut their estimate for world production by 15.3m tonnes more than analysts had expected, shortly after Russia further downplayed hopes for its prospects in grain.

Prices had already enjoyed a firm start on Thursday, after Russia's farm ministry implied that the country's export ban, which is due to last until the end of the year, may last well into 2011.

The country, the third largest wheat exporter last year, has seen drought wither its grain crop, which had been expected by merchants to hit 100m tonnes, to an estimated 60m-65m tonnes.

However, the rally was extended after the US Department of Agriculture, in a much-watched monthly crop report, slashed its forecast for world production to 645.7m tonnes, an estimate short of analysts' expectations by more than 4m tonnes .

'Record heat'

The downgrade reflected chiefly the "severe and persistent" drought in Russia, where "record heat during July and early August have further reduced summer crop prospects", the USDA said, cutting 8.0m tonnes from its forecast for the country's wheat crop.

The harvest forecast for neighbouring Ukraine was cut by 3.0m tonnes, "as heavy summer rains damaged maturing crops and hampered harvesting in western and southern growing areas".

The USDA also cut its estimate for the European Union harvest cut by 4.3m tonnes, reflecting too much rain in some areas, and too little in others, with hopes also reduced for producers including Belarus, Brazil and Uruguay.

Price warning 

Department officials added that, despite the reductions, there was "no global shortage of food grains".

Nonetheless, the downgrades were perceived as bullish by investors, who sent Chicago wheat for September soaring 5.7% to $7.34 a bushel as of 17:20 GMT.

Earlier, Paris wheat for November closed up 3.3% at E213.00 a tonne, with London wheat for the same month up 3.3% at E152.65 a tonne.

Trade switch 

A few countries saw their harvest hopes upgraded, including Australia, where eastern areas have enjoyed near-ideal rainfall, and the US, where spring wheat now looked on course for a record yield of 46.6 bushels per acre.

However, the USDA ditched expectations of a 3.3m-tonne rise in American wheat stocks over 2010-11, saying inventories would instead show a small fall as the US picked up exports lost from the former Soviet Union.

With Russia banning exports, and Ukraine is considering trade curbs, the forecast for the region's shipments was near-halved to 15.9m tonnes.

US exports would come in at 32.7m tonnes, a jump of 36%, and meaning they will exceed America's own use of the grain for only the second time since the early 1990s.

Other countries set to pick up extra trade from importers include Australia, the EU and China.