WET weather has hit the US, including previously drought affected areas.
It is disrupting harvest, and causing quality issues with sprouting concerns for some of the Hard Red Winter wheat crop, and vomitoxin risks for soft red winter wheat.
That has allowed a brief rally in wheat futures during the past week, but wheat prices into the Middle East have still come under pressure from Black Sea exporters, and despite harvest delays, seasonal harvest pressure is building within the US market.
It looks as though there is still some downside in wheat futures under normal harvest pressure.
Only a significant change in market sentiment on the back of US stocks data due at the end of June, or from a serious turn to the worse in the season in the Back Sea, or from some similar trigger, will prevent the market from drifting lower until we get clear of the bulk of the northern hemisphere harvest.
Here in Australia we are also not generating any real concerns about our season to date.
Southern parts of the wheat belt continue to get good winter rains, despite forecasts suggesting winter rainfall might come under pressure.
The buildup in soil moisture levels will carry well into spring and shield many crops against a dry finish.
The season has also been running ahead of normal in terms of planting and crop development across large parts of the southern producing regions as well, and this, coupled with good soil moisture, will see crops get to maturity with strong yield potential.
While northern cropping districts have not had as much rain as southern areas for June, outside of Queensland it looks as though most areas have had some rain to keep crops developing.
Right now we cannot point to a production problem overall for Australia, with close to three months of our normal seven-month growing season now under the belt.
While the risk of El Niño developing is still high according to Bureau of Meteorology outlooks, the impact of a dry finish is likely to become more benign the further we go into winter with good rainfall events.
That leaves the marketing strategy for this year very much in the normal category.
That is, to stand aside during the northern hemisphere harvest, and recommence sales leading into our own harvest in September and October.
Even if the season in Russia takes a turn for the worse, history shows there is little point in reacting by making new sales, until the market has finished absorbing the news and factored in the potential impact on exports to the Middle East and Asian destinations.
Unless we get a serious trigger to reverse the current trend, we would expect US futures to continue falling, and on the December contract, test the US600 cents a bushel mark.
A new contract low, taking out the low in January (US577.75c/bu) would then be the next target on the downside.
On nearby contracts, the low in January was about the US550c/bu mark.
If we test that low with either the September or December contracts, it will see Chicago Board of Trade (CBOT) wheat futures trade to their lowest point since July 2010.
The only problem with losing much more ground from current levels, is it makes it that much harder for the market to recover to a much more reasonable level by our own harvest in November.
Malcolm Bartholomaeus is the market analyst for Bartholomaeus Consulting, Clare, South Australia.
