Wheat Rises as U.S. Report Shows Smaller-Than-Expected Supplies

By Tony C. Dreibus

Sept. 30 (Bloomberg) -- Wheat rose from a 13-month low after a government report showed U.S. inventories were smaller than some analysts expected.

Warehouses held 1.86 billion bushels (50.6 million metric tons) as of Sept. 1, up 8.1 percent from a year earlier, the U.S. Department of Agriculture said. That was less than the 1.94 billion expected by analysts surveyed by Bloomberg News. Wheat still fell 15 percent in September, the biggest monthly decline since May 1997.

``The wheat quarterly stocks was a little positive,'' said Clark Neighbors, an analyst at Bump Investor Services in Cedar Rapids, Iowa. ``The average trade guess was 1.94 billion, so that is a little supportive.''

Wheat futures for December delivery rose 12 cents, or 1.8 percent, to $6.80 a bushel on the Chicago Board of Trade. The price earlier touched $6.4775, the lowest intraday price for a most-active contract since Aug. 6, 2007. The grain has tumbled 50 percent from a record $13.495 on Feb. 27.

Global stockpiles may increase 18 percent to 139.9 million tons in the year that started June 1, the USDA said in a Sept. 12 report. World production is expected to jump to a record 676.3 million tons, the agency said.

Still, a lack of precipitation in parts of Australia, forecast to be the third-biggest exporter of wheat behind the U.S. and Canada, probably will shrink the nation's crop. Drought slashed the country's output in the past two years.

Australia Forecast

Rabobank Group lowered its production forecast for Australia today by 500,000 tons to 20.5 million.

``Production expectations have edged lower in September following frost in Western Australia and dry conditions, particularly in Victoria, parts of South Australia and southern New South Wales,'' Luke Chandler, a senior commodity analyst at Rabobank in Sydney, said in a report.

Futures also rose on speculation that lawmakers will salvage the U.S. government's $700 billion bank-bailout plan, spurring investors to sink more money into commodities and equities. The Dow Jones Industrial Average rose as much as 4.1 percent today after plunging 7 percent yesterday.

Wheat is the fourth-biggest U.S. crop, valued at $13.7 billion in 2007, behind corn, soybeans and hay, government data show.

To contact the reporter on this story: Tony C. Dreibus in Chicago at Tdreibus@bloomberg.net.