Updates throughout with usda data

By Heather Schlitz

July 10 (Reuters) - The U.S. Department of Agriculture on Friday lowered its U.S. wheat production estimate in a closely watched monthly supply-and-demand report, after the agency last month projected the smallest harvested wheat area since 1877.

The USDA lowered U.S. 2026/2027 wheat production to 1.536 billion bushels, above an average of analyst estimates for 1.525 billion bushels and below its June estimate of 1.543 billion bushels.

The report was "less friendly on wheat than anticipated," said Charlie Sernatinger, analyst with Marex Capital.

Still, the production figure would represent the smallest U.S. wheat harvest since the 1970/1971 marketing year.

World wheat ending stocks also fell to 272.84 million bushels, due in part to smaller planted acreage in Canada and drought damage to the U.S. wheat crop. The world ending stocks figure fell below the average analyst expectation of 273.17 million bushels.

Wheat futures maintained gains after rallying roughly 3% ahead of the report as traders reacted to signs of escalation in the four-year war between Russia and Ukraine, both major wheat exporters, including signs of disruption to shipping in the Sea of Azov. Ukraine has struck a number of Russian tankers in the Sea of Azov that connects with the Black Sea, and traders said there was talk of a possible closure to Azov traffic.

In corn, the USDA lowered its forecast for 2026/2027 U.S. corn ending stocks to 1.79 billion bushels, below analyst expectations of 1.873 billion bushels, after reporting tight quarterly corn stocks in June.

"It's a pretty friendly report for corn. It will be very much weather-driven from here on out. The balance sheet that USDA gave us today should make us very sensitive to weather. It really sets the stage for an interesting finish to the growing season," said Ted Seifried, chief market strategist of Zaner Ag Hedge.

The USDA also raised its forecast for the 2026/2027 U.S. corn production to 16 billion bushels -- up slightly from its June estimate of 15.995 billion bushels and above analyst expectations for 15.975 billion bushels.

The USDA pegged 2026/2027 U.S. soybean production at 4.475 billion bushels, slightly above analyst expectations of 4.459 billion bushels and above the June estimate of 4.435 billion bushels. The agency reported U.S. 2026/2027 soybean ending stocks at 310 million bushels, unchanged from June and below analyst expectations of 330 million bushels.