Investors insistent on buying into wheat, despite abundant supplies of the grain, may be better off buying Kansas or Paris contracts than their-better known Chicago equivalents, Rabobank has said.

A halving to less than $0.35 a bushel during July in the premium that higher-quality Kansas wheat garners over its Chicago equivalent defies expectations of a shortage of high protein grain, a report by analyst Luke Chandler said.

This premium may be poised to rebuild, especially if the US crop joins Europe's in suffering increasing quality concerns.

"Fears of a global shortage of milling wheat may result in an outperformance of Kansas wheat… and even Paris wheat, over the next 12 months," the note said.

Rain damage

In Europe, fears for crop condition have been stoked by rainfall in the northern half of the region, which has delayed harvesting and stoked fears that milling wheat will be rendered fit only for feed use.

"In the past week, nearby Paris milling wheat prices have jumped 2% as a result of these increasing quality risks and strong demand from Egypt which, for the time being, has turned away from poorer quality Russian wheat," the report said.

The spread between London feed wheat and Paris wheat, which has also declined, "should recover some of the ground based on recent weather events".

Heavy stocks

However, there was "little cause for optimism" for wheat prices overall in 2009-10, given the abundant global supplies, the briefing added.

"A further build up in world inventory levels is likely to weigh on world prices," Mr Chandler said.

A key factor for prices would be the extent to which Canadian and US crops could make up for Europe's potential shortfall in high-quality wheat.