Wheat prices have slumped over the past week, having readjusted after recent sharp rises. London futures dropped by £11/t on the week, putting spot feed wheat at about £144/t ex-farm.

A lack of any further bullish news meant spot prices had probably reached an interim high, said a report by analyst Rabobank this week. But firmer US corn prices and expected lower wheat production in Australia could bolster values well into next season, it said.

“The market has now realised that not only will the Russian drought impact the wheat market, but a lack of feed grain exports from the Black Sea region in the 2010/11 season will place additional demand pressure on US corn to fill this supply void until next harvest.”

Winter wheat plantings in Russia were 20-30% behind last season, so even with a return to normal yields, the need to rebuild stocks could curtail exports in 2011/12, said the report. Freezing conditions in the Canadian Prairies had further setback this year’s milling supplies, and drought in Western Australia had slashed 1m tonnes off the region’s forecast production.

Although EU exports were 22% above the same time last year, constrained supplies would slow exports in the coming months. “This may evolve into a multi-year rally in the grain markets,” Rabobank said.