The US Departement of Agriculture's output forecast dropped 2.3% from last month, which was more than expected, to 645.73 million tonnes.
That was below recent estimates from other high-profile agriculture agencies. Production prospects are fading because of a severe drought in the former Soviet Union.
In a widely anticipated report, the U.S. Department of Agriculture on Thursday cut its forecast for 2010-11 global wheat output by 2.3% to 645.73 million tonnes.
That was lower than expectations and below recent estimates from the Food and Agriculture Organization and International Grains Council, which both saw the crop at 651 million tonnes. It was a surprising move because USDA is traditionally more cautious in its crop adjustments.
Wheat-production forecasts have been slashed repeatedly since the middle of the summer, when the severity of record-setting heat and drought in the former Soviet Union became apparent.
Wheat prices hit nearly two-year highs on Aug. 5 as Russia banned grain exports because of the drought, but prices have pulled back since then.
Ukraine halts wheat
Ukraine's state customs service on Thursday said it had blocked the export of more than 28,500 metric tonnes of wheat on two boats due to incorrect paperwork.
Unlike Russia, Ukraine, also a big wheat exporter, hasn't put an official ban in place, but some analysts say government officials there are using bureaucratic means to slow down shipments overseas.
Analysts expect that prices may be able to top $8 again if other countries join Russia in officially banning grain exports.
After announcing its export ban, Russia asked Belarus and Kazakhstan, its partners in a recently formed customs union, to halt grain exports, fearing that Russian grain would be exported via the two countries.