Commodities Review: Wheat drops on higher output forecast

The U.S. Department of Agriculture predicted global wheat production will rise to a record 656 million tons in 2008 and 2009 as historically high prices prompted farmers around the world to plant more of crop.

"The high price did its job and got the acres," said Jason Ward, an analyst at Northstar Commodity.

Consumption is also expected to surge, keeping global supplies at historic lows. Even so, the 2008-09 season "is expected to be the first crop in three years to exceed total consumption," the USDA said.

The department said U.S. winter wheat production is expected to jump 17 percent this year to 1.78 billion bushels. Total U.S. wheat production is forecast to rise 16 percent to 2.4 billion bushels.

Those forecasts helped push prices lower Friday.

"They're setting the bar high here, and the market's responding to that," Ward said.

July wheat futures fell 18 cents to $8.04 a bushel on the Chicago Board of Trade.

Corn futures shot to another record high of $6.375 before easing to trade up 2.25 cents at $6.325 a bushel on the CBOT.

Traders have been pushing prices for the crop higher amid concerns about unusually wet weather throughout key growing areas in the Midwest. Another batch of rain showers moved through the region overnight and into Friday.