THE wheat market has turned the corner, with good gains last week, to see US26.25 cents a bushel added to the Chicago Board of Trade (CBOT) December contract.
In Australian dollar terms, this was $12.07 a tonne.
Having spent 34 trading days less than $200/t, December futures are now above that level for the first time since 26 August.
In the past 10 years, wheat prices have spent very little time under this benchmark price.
There are a number of factors combining to give strength to the market.
One is bad weather in Canada which has put the last 20 per cent of their crop at risk of being lost, reduced, or at best, severely downgraded.
On the other side we have dry weather impacting the planting and establishment of the next northern hemisphere winter wheat crop.
The US, Europe and the Black Sea all have pockets where there are issues, but as the week wore on, these seemed to fade into the background a little.
US wheat is now also cheap in global markets, and can come in cheaper than Russian or Romanian wheat in some markets.
That should see the US picking up more business into the Middle East and North Africa.
Ahead of all this the burdensome US and global wheat stocks positions saw speculators build record short (sold) positions in the futures market.
That leaves the market vulnerable to very strong buying if there is any sniff of a recovery in prices.
That became a factor in extending the price gains during the Thursday and Friday trading sessions late last week.
We also had the US Department of Agriculture (USDA) October report released early in the week which saw a modest price rally stall as projected US ending wheat stocks were raised yet again.
However, the global picture tightened a little, with tightening supplies and a 700,000t drop in global ending stock estimates.
Stocks within the US are now expected to lift 4.43 million tonnes year on year, which is a 1.05 million tonnes increase over the September estimate.
However, balancing that out, we have stocks outside of China and the US falling by 9.42 million tonnes this year, which is a further 680,000t fall compared to the September estimate.
The main area of doubt in current numbers revolves around the last of the Canadian harvest, and the size of our own harvest.
The USDA put our crop at 28.3 million tonnes, up 800,000t, but other forecasts are pushing our crop as high as 31 million tonnes.
If we go above the current USDA numbers, it will end up adding to global stock estimates.
The current estimated tighter stock position outside of the US and China is a part of the mechanism that will inevitably shift more exports to the US, and eventually allow US wheat prices (that is, US futures) to begin a sustained recovery.
During 2017-18 a likely outcome is for global production to ease as we see a return to normal seasons stall a run of record yields in key producing regions.
Consumption may fall from its record level, but only if prices rally to reduce the competitiveness of wheat in global feed markets.
Stocks outside of China and the US should tighten to levels not seen since 2007.
The slow transition to declining wheat stocks should emerge during 2017, and with it come price volatility and selling opportunities as the market juggles with the change in trends.