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CHICAGO — U.S. wheat futures rose on Thursday, setting contract highs as the U.S. Department of Agriculture (USDA) surprised traders with a smaller-than-expected forecast for the variety grown in the Plains and used to make bread.

Corn and soybean futures also strengthened.

The USDA, in a monthly crop report, projected hard red winter wheat output at 590 million bushels, below analysts’ estimates for 685 million. Hot weather has stressed the crop, with drought affecting about 69% of U.S. winter wheat areas as of May 3, according to separate government data.

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In Brazil, the government food supply and statistics agency Conab estimated the total 2021/22 corn crop at 114.588 million tonnes, compared to a previous forecast of 115.602 million.

Traders are keeping a close eye on global grain production as supplies have tightened due to crop shortfalls and Russia’s invasion of Ukraine, a major wheat and corn exporter.

The USDA’s estimate for U.S. hard red winter wheat output is “indisputably bullish,” ED&F Man Capital analyst Charlie Sernatinger said.

Chicago Board of Trade July soft red winter wheat climbed 65-3/4 cents to close at $11.78-3/4 a bushel and reached its highest price since March 9.

K.C. July hard red winter wheat ended up 69-1/2 cents at $12.70 a bushel and set a contract high. MGEX July spring wheat climbed the daily 60-cent limit to $13.16 a bushel, a contract high. MGEX said the limit will expand to 90 cents on Friday.

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“Wheat is the feature today with U.S. old- and new-crop stocks clocking in below expectations, along with new-crop world wheat stocks,” said Rich Feltes, head of market insights for broker R.J. O’Brien.

CBOT July soybeans finished 7 cents higher at $16.13-3/4 a bushel and July corn rose 3 cents to $7.91-1/2.

The USDA lowered its forecast for U.S. corn yields to 177 bushels per acre, down 4 bushels from a February estimate, due to slow springtime plantings. (Reporting by Tom Polansek in Chicago; Additional reporting by Julie Ingwersen in Chicago, Gus Trompiz in Paris, Naveen Thukral in Singapore and Hallie Gu in Beijing; Editing by Uttaresh.V, Will Dunham, Sherry Jacob-Phillips, Alexandra Hudson, Nick Zieminski and David Gregorio)