December wheat was down 1 3/4 cents late in the overnight session. Outside market forces look negative with a stronger US dollar and weakness in metal and energy markets. The surge higher in world wheat ending stocks to an 11 year high plus news of a jump in soft red wheat ending stocks to the highest level in history were seen as the primary bearish factors for the USDA report yesterday. US exporters may need to see lower prices ahead in order to compete with Black Sea producers on the world market if Russia plans to wait until grain exports exceed 23-24 million tonnes before considering export tariffs. December wheat closed sharply lower on the session yesterday, as poor demand news and higher world production helped drive the market lower, with futures giving back much of the rally from Tuesday. In the USDA report, US wheat ending stocks were pegged at 837 million bushels, which was more than 100 million above trade expectations and was up from 761 million estimated last month. In 2007/08, ending stocks totaled 306 million. The USDA lowered wheat feeding to 160 million from the 240 million bushels estimated last month and also lowered exports by 50 million bushels from last month to just 975 million bushels, down from 1.289 billion last year. The wheat class breakdown showed hard winter wheat carryover at 298 million bushels, up 26 million from last month's estimate but down from 386 million last year. Soft red wheat ending stocks were revised higher by 47 million bushels to a new record high 244 million bushels, up from 171 million last year. Spring wheat stocks were reduced by just 1 million to 157 million vs. 185 million last year. Some traders had expected spring wheat ending stocks to slip under 100 million. World ending stocks for 2011/12 were pegged at a 10-year high of 202.4 million tonnes, up from 194.6 million estimated last month. Demand numbers were far worse than expected, with wheat feeding down in the US and down nearly 5 million tonnes for the world. World production was revised up by 3 million tonnes. The jump in US and world ending stocks was not anticipated, and this helped to drive the market sharply lower yesterday. Open interest was down more than 7,000 contracts on the rally Tuesday, suggesting short-covering. Funds were thought to be holding a near-record net short position in wheat going into Tuesday.
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