The world is even more awash with wheat than had been thought despite damage wrought by dry weather to crops in Canada, Spain and parts of Eastern Europe.

Global wheat stocks were, at 168.4m tonnes, 1.35m tonnes higher at the end of last month than previously believed, the US Department of Agriculture said.

They will rise a further 8.5% to 182.7m tonnes by May 2010, the USDA said, adding 750,000 tonnes to its forecast.

The data sent July wheat down 2.9% to $5.96 a bushel in Chicago, with London and Paris contracts also closing sharply lower.

Weather hardships

Wheat production for 2009-10 will come in at 781.5m tonnes, nearly 3m tonnes lower than previously estimated and 10m tonnes short of the record high two years ago.

The USDA cut its estimate for European Union harvests by 2.3m tonnes, "reflecting lower expected yields in Hungary, Romania, and Spain where continued dryness has reduced crop prospects".

Cuts of 1.0m tonnes were made to estimates both for production in Canada, where "unseasonably cool temperatures that have delayed spring wheat seeding and development across the Prairie Provinces", and in Ukraine, thanks to "persistent April and May dryness in central growing areas".

Price rises

However, the USDA noted higher hopes for Russia's harvest.

And firmer wheat prices, lifted by a strong soybean market, would reduce the grain's attractions to livestock farmers, so reducing consumption.

"Higher projected prices are expected to limit the competitiveness of all but the lowest quality wheat in feed rations," the USDA said in its June World Agricultural Supply and Demand Estimates report.

US farmers would receive between $4.90 and $5.90 a bushel for wheat, the USDA said, adding $0.20 to its forecasts.