![Drought hits US crop Drought hits US crop](/images/transform/v1/crop/frm/silverstone-agfeed/2056217.jpg/r0_0_1024_683_w1200_h678_fmax.jpg)
NEARBY wheat futures are finding a short-term base at about US560 cents a bushel.
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For December futures the equivalent price level is US595c/bu.
In Australian dollar terms we are talking just above $230 a tonne for nearby futures, and close to $250/t for December futures.
Old season cash prices have a base of $255/t Port Adelaide, and ranging up to $324/t in the Newcastle zone.
New season prices are hovering about $260/t.
The drop in futures prices from US660c/bu at the end of November to about US600c/bu at the end of December has carried through into January, with a low for the month of about US560c/bu.
That point was reached on January 10.
Since then the market has traded above that level, as the market appears to be finding a short term base.
There are two issues on the go at the moment.
One is drought in the US and the other is winter kill issues in parts of the US and the Black Sea region.
The area being drought declared in the southern parts of the US is slowly increasing.
It has also limited the amount of snow cover available to protect winter wheat from further cold conditions.
A lot of the US is set to enter a new cold snap this week, with parts of the Mid West without sufficient snow cover unless more arrives ahead of the extreme cold.
Either way damage is expected from this next cold event, and the one earlier in January.
Any losses will come on top of lower planted acres for both winter and spring wheat crops in the US this year.
Another cold period is also hitting the Black Sea region.
Snow cover has been thin, although more snow was expected ahead of the next period of freezing conditions.
The risks associated with the current cold weather may not be triggering a wholesale price rally, but they are certainly contributing to the support in prices currently being seen.
Uncertainty about acreage losses may well be the trigger for a modest price rally in the near term.
Current low US wheat prices are also unearthing new demand from traditional importers.
Even China is rumoured to be in the market for another 200,000t of wheat to take advantage of the lowest prices since 2010.
Middle East buyers have been very active, with Algeria and Iraq buying a mix of French, Australian, Canadian and US wheat.
Other buyers include Egypt, and Japan and Taiwan have recently bought more US wheat.
In Australian dollar terms both nearby and December wheat futures are about $6/t above the low set on January 13, as both new and old season futures move in tandem.
Strong basis levels for both new and old season Australian Premium White (APW) prices saw old season cash prices end last week at $260/t at Pt Adelaide.
Newcastle prices hit a new high of $324/t, but Victorian prices peaked at $290/t before pulling back to $284/t last Friday.
New season wheat prices continue to hover at levels that are just on profitable for most growers.
We need a price rally to give an opportunity for forward sales to put a base in prices for the 2014-15 season.
Lower prices are still expected by the time we get to our 2014 harvest.
Malcolm Bartholomaeus is the market analyst for Bartholomaeus Consulting, Clare, South Australia.