THE wheat market faltered late last week, with two sessions in a row where prices fell, after nearby futures hit the highest level since May 2013.
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For the week, nearby wheat futures were up US6 cents a bushel, and December futures were up US4.25c/bu, but in Australian dollar terms December futures were down $0.15 a tonne.
The political issue in Crimea has almost taken a back seat.
The risk of trade sanctions against Russia are low because of the need to keep shifting oil and gas to some European countries, and the need to prevent food prices from spiraling out of control.
That reduced risk tips the market focus back to weather issues.
At the moment not a lot has changed on the fundamental side of the market.
There is still plenty of wheat.
Current supply factors do not justify current price levels.
In fact $300/t for new season wheat is about where we might expect to see prices if things go wrong with the global crop in 2014.
To get to $310/t in new season export markets last week was a strong price level to achieve.
The markets seem to be factoring in a poor global crop this year, but that is still ahead of us.
That means that any hint of things not being quite so bad is now likely to put pressure on prices, and if by mid year the crop looks reasonable, we may be back on track for much lower price levels leading into our harvest.
For prices to remain at current levels in December, market fundamentals have to catch up to where the market is currently suggesting there is a possibility.
The main weather concerns pushing the market at the moment are in the US and the Black Sea.
Winter conditions are continuing in the US, but it is not likely to get cold enough to produce more damage this week, and the latest forecasts have lifted temperatures anyway.
The drought in the US is the other factor, and while it is dry in parts of the hard red winter wheat belt, areas that grow soft red winter wheat are not suffering in the same way.
Some precipitation has now entered the forecasts, and longer term forecasts for spring are also more positive.
In the Ukraine, spring temperatures have been relatively mild, and spring plantings have moved ahead at a good pace.
There is a view, however, that winterkill has been above average.
The extent of the damage will become apparent in the next couple of weeks, but if good spring conditions are seen as unfolding, it may compensate anyway.
Current wheat stock estimates for the end of the 2013-14 marketing year are pegged at 183.81 million tonnes by the US Department of Agriculture (USDA).
In 2012-13 stocks of 175.92 million tonne supported prices during our harvest of $300/t.
To get down to those stock levels in 2014-15, the global wheat crop would have to pull back by 15.7 million tonnes.
If consumption also falls a little, we may need production to fall by closer to 20 million tonnes year on year to trigger stocks levels supportive of prices around $300/t.
At this stage nobody is suggesting a pull back in the global crop of that magnitude.
Certainly the current problems in the US and Black Sea regions are not bad enough to begin driving a decline in the global crop to that degree.
Malcolm Bartholomaeus is the market analyst for Bartholomaeus Consulting, Clare, South Australia.