THE fallout from the August US Department of Agriculture report continues, with wheat futures making new contract lows, and heading towards US400 cents a bushel.
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On continuous charts, we are still above the lows seen in April this year, and about US50c/bu above the lows seen at the end of August last year, which is assumed to be the long term low since 2007.
The wheat harvest is nearly over in the US now, but wheat will continue to be pushed around by the US corn market in particular.
There is also the Canadian wheat harvest, and harvest is continuing in the European Union and Black Sea regions.
EU wheat prices are coming under pressure from weaker global markets.
The harvest in France is basically wrapped up, but bad weather has caused delays in Germany, Poland, the Baltic region and the UK.
The bad weather will also increase the percentage of feed wheat in the EU this year.
The big crop in Russia is again forcing EU wheat out of key Middle east markets, with Russian and Ukrainian wheat about $10 a tonne cheaper than French wheat in the last tender.
This will remain an issue for the next year, although it is expected that logistics constraints will limit just how much wheat Russia can export.
That in turn will continue to keep US wheat out of key Middle East and North African markets as well, and curb the expected rundown in US stocks this year.
The problem with Russia not clearing their second record crop in a row is that they will continue to hold stocks that will hang over the global market.
Wheat stocks in Australia and Canada will pull back this year because of lower production, so that will leave ongoing large stocks in the US and Russia to pressure wheat prices for the rest of this year, and into 2018.
That in itself becomes interesting, because the world will not want to rely on Russia for its wheat supply.
Russia has proven to be an unreliable supplier during the past 10 years, from drought as well as government interference in the market via export taxes and export quotas.
US wheat stocks are falling this year, but they will remain at high levels still.
That leaves the global stocks problem being a problem of high stocks in China, the US, and now Russia.
Elsewhere, stocks are either declining or stabilising. Major importers have also been reducing their stock levels over the last year.
While Chinese stocks are not likely to influence global trade, Russian and US stocks (or supplies in total) will have a big impact on global trade and wheat prices.
While we have been waiting for US stocks to clear to allow a strong price recovery, we now have to see Russian stocks deplete as well.
This is where it gets interesting.
It looks as though we will have another year of low wheat prices, which will curtail any lift in production in the US, Canada and Australia.
That will make the world even more reliant on Russian wheat supply to cover for any supply shocks or lift in demand.
What happens in Russia and Ukraine in 2018 is going to determine the extent of any price recovery in our post harvest period next year.
Early signs of a production issue should highlight the lack of wheat stocks elsewhere and cause some concern for major wheat importers.
