(Updates with analyst quote, prices)
By Mark Weinraub
WASHINGTON, Feb 9 (Reuters) - U.S. wheat supplies were seen shrinking below market estimates as the export outlook brightened despite ample global stocks and a firm dollar that had been viewed as a brake on overseas demand, the U.S. Agriculture Department said on Thursday.
Domestic corn stocks also were seen falling below the government’s previous outlook as ethanol makers ramped up production, USDA said in its monthly supply and demand report.
Chicago Board of Trade soft red winter wheat futures dipped briefly after the report was released before quickly returning to positive territory. Corn eased to session lows but recovered most of their losses.
U.S. wheat ending stocks for the 2016/17 marketing year were pegged at 1.139 billion bushels, down from the January estimate of 1.186 billion bushels and below market forecasts ranging from 1.145 billion to 1.211 billion bushels.
Domestic corn ending stocks were lowered to 2.320 billion bushels from 2.355 billion.
The USDA left its outlook for 2016/17 domestic soybean ending stocks unchanged at 420 million bushels. It also held its forecast for U.S. soy exports steady at 2.050 billion bushels despite a fast pace of shipments through January.
“Competition from expected record South American exports will limit U.S. shipments to well below last year’s record level this summer,” USDA said in the report.
Soybean futures, which had been trading close to unchanged ahead of the report, turned sharply lower.
“I think this knocks a little wind out of the sails for now. People who were buying soybeans on the hopes of a bullish report are pulling back a little bit,” said Ted Seifried, analyst at the Zaner Group.
The government left its estimate of soybean production in Brazil unchanged at 104.00 million tonnes. It cut its forecast for the Argentine soybean harvest by 1.50 million to 55.50 million tonnes.
Analysts, on average, had expected the report to show Argentine soybean production at 54.54 million tonnes and Brazilian soybean production at 104.08 million tonnes, according to a Reuters survey.
On the global front, USDA’s estimate of world wheat ending stocks was cut to 248.61 million tonnes from 253.29 million tonnes. USDA cited a cut to harvest expectations in India and Kazakhstan as the reason for the drop.
World corn ending stocks were lowered to 217.56 million, with usage by China raised to 231.00 million tonnes from 227.00 million tonnes.
World soybean ending stocks were lowered to 80.38 million tonnes from 82.32 million tonnes.
Additional reporting by Michael Hirtzer in Chicago; Editing by Paul Simao and Grant McCool