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This isn’t good news for anyone worried that soaring food prices are fueling global inflation.

Today, February 9, the U.S. Department of Agriculture lowered its forecasts of global wheat inventories because of falling production in the Ukraine. Global stockpiles will total just 177.77 metric tons on May 31, 2011, the USDA now projects. That’s down 0.1% from the agency’s forecast of 177.99 million metric tons in January. Projected wheat production is down about 2% in the Ukraine from last month’s forecast.

A report like this stirs memories of 2010 when drought cut production in Russia and Eastern Europe. But the real problem is that the world’s stocks of wheat are at low levels and stock piles of the high-quality milling wheat needed for bread may be extremely tight. Nobody is quite sure what part of global wheat stock piles is high-quality milling wheat and that’s got the market’s knickers in a twist.