MULTIPLE factors were at play in the wheat market as we entered this week.
Included were currency moves, the upcoming November US Department of Agriculture (USDA) report, concerns over supplies of milling wheat in the US, slow farmer sales, and finally the impact of a wet start to our own harvest.
Currency moves have been driven by sentiment about the US dollar.
At the end of last week a rally in the US dollar hit markets, putting pressure on US dollar denominated commodities, which in turn delivered a drop in the value of the Australian dollar which insulated us from the full impact of pressure on the underlying grain and oilseed prices.
The influence of the USDA report for this week was at play as well, helping to hold wheat futures up with expectations that global wheat supply numbers will finally be tightened a little, as the reality of the dry finish here in Australia is finally factored into our production estimates.
There is also a growing understanding that the lift in global stocks is primarily in China, with those stocks being quarantined from global markets.
A bigger player though is the US market, where supplies of Soft Red Winter (SRW) wheat, on which the CBOT wheat contract is based, are tight.
Apart from supplying the feed market, this grade of wheat is also used for biscuits and other products where high protein is not needed.
With the wet harvest in the US, milling quality supplies are tight and has pushed SRW prices to unusual premiums against high protein wheats.
The scramble for limited supplies of quality milling wheats has been seen by some as one factor that might make the post-harvest market for us stronger than normal. The potential for that seems to be building already.
Another factor supporting the current prices for all oilseeds and grains is slow farmer selling across the northern hemisphere, as farmers reject current price levels and hold out for higher prices in 2016.
It is pushing spot prices higher as the market tries to encourage more sales.
This may become a problem early next year when farmers have to sell to generate cashflow and to empty bins for their next crops.
The view is that corn, soybean and canola prices might get hit, but it may not be that simple for wheat, where the shortages of milling quality supplies might be the stronger influence.
Being laid across these multiple factors in the international market is a wet start to our harvest, which is causing delays, and has the potential to damage grain and reduce supplies of milling wheat in our domestic market and for competing exporters.
We are seeing our cash prices move to their highest levels since August, despite weak basis levels that have not seen our prices follow the upward move in CBOT futures in full.
It probably means that if US futures slide away, we will be protected by a lift in basis levels as our traders try and keep prices attractive for growers to sell against, once grain begins to flow again this week.
While there are now a number of factors that would support a move higher in CBOT futures prices, the reality is that US wheat exports are still weak, indicating that US wheat prices remain uncompetitive in global markets, even though latest trades have been above the lows set a month or so ago.
Malcolm Bartholomaeus is the market analyst for Bartholomaeus Consulting, Clare, South Australia.