Will wheat prices really stay elevated? The United Nations' food agency on Tuesday said that "high and volatile" agricultural commodity prices were "likely to prevail for the rest of this year and into 2012".

While world cereals output will rise 3.5% to 2.32bn tonnes in 2011, after falling 1% last year, "the general situation for agricultural crops and food commodities is tight", David Hallam, director of the UN Food and Agriculture Organization's markets division said.

While prospects were "encouraging" in many countries, notably the former Soviet Union producers, "weather conditions, featuring too little and in some cases too much rain, could hamper maize [corn] and wheat yields in Europe and North America", the FAO said.

Indeed, wheat stocks were set to fall by 2.6m tonnes to 182.9m tonnes in 2011-12 as output falls short of consumption.

"A return to more normal price [wheat] levels is unlikely, at least during the first half of the new season," the FAO said, a period covering until at least the end of this year.

'Minimal impact'

However, Barclays Capital took a more downbeat view, noting the improvement in weather conditions which had allowed US growers at least to make headway on plantings last week, with China appearing set to emerge relatively unscathed from a dearth of rainfall too.

"Severe drought conditions seems to have less impact on [Chinese] winter wheat, which is well into its harvesting season and less affected by lack of irrigation when compared to rice crops," BarCap analyst Sudakshina Unnikrishnan said.

"Anecdotal evidence of minimal impact on winter wheat harvest in China aligns with the absence of any downward revisions to wheat production in China in the last Wasde report," the benchmark monthly briefing on world crops released by the US Department of Agriculture.

"Improvement in the wheat supply outlook in US, Europe and China, coupled with the return of Black Sea wheat exports, supports our expectation of wheat prices trending lower towards the second half of 2011," Ms Unnikrishnan added.

Futures prices 

The initial advantage, at least, went to Ms Unnikrishnan, with wheat prices on Tuesday adding to losses in the last session in Chicago, where the July lot stood down 1.0% at $7.36 ½ a bushel at 16:40 GMT, and in Paris, where the November lot stood down 1.6% at E229.50 a tonne.

The Paris contract has lost 10% since Russia 10 days ago revealed it was to let a ban on grain exports lapse on July 1.

Minneapolis spring wheat - which has proved resilient, given a historically slow pace of US sowings – fell 3.0% to $10.11 ¼ a bushel for July.

Extra pressure on prices is seen coming from harvest pressure, with 10% of US winter wheat in the silo, a higher-than-normal proportion by now, according to official data, although the quality of the crop is seen compromised by a dry growing season.