Wheat prices look set to stay weak, analysts have warned, with Commonwealth Bank of Australia warning of huge Australian stocks, and Rabobank forecasting the Paris market will drop to three-year lows.

A Rabobank report said that Paris wheat prices, which set a succession of contract lows this week, face a further fall of 5-10% "over the coming months", weighed down by bumper production at a time of declining exports.

Paris's November contract stood down E10.50 at E120.75 a tonne in morning trade, with London's November contract down £0.50 at £91.75 a tonne.

European Union wheat exports will plunge to 17m tonnes in 2009-10 from a record 24.5m tonnes last year, following good crops in North African and Middle Eastern importing states, Rabobank said.

"Given the build-up in world and EU wheat stocks in recent seasons, it is difficult to make a bullish case for prices, both in the EU and globally," the report added.

'Vacuum of bullish news'

At CBA, analyst Luke Matthews, noting that the wheat market was "facing a vacuum of bullish news", said that Australia was on course for wheat stocks of 4m tonnes at the end of the 2008-09 season, which close this month.

Australia's official commodity economics bureau, Abare, has pegged the figure at 2.4m tonnes.

CBA said it had a weaker estimate of domestic consumption, citing data from the Australian Bureau of Statistics.

"Our expectation of higher than expected local wheat stocks will add further weight to an already depressed wheat market," Mr Matthews said.

"Until significant world crop issues materialise, or new crop buying increases in earnest, it will be difficult for the market to make a sustained rally."

'Delicately poised'

He added that Western Australia, the country's biggest wheat producing state, looked on course for a crop only 100,000 tonnes below last year's huge 8.9m tonnes, thanks to "near perfect conditions" in some areas.

However, prospects for other states remained "delicately poised", with dry weather still a problem for some southern and eastern areas.

The official rainfall forecast "does not bode well for a strong finish for many South Australia, Victoria and south west New South Wales wheat crops. This could place downside risks to production estimates."

Mr Matthews trimmed by 200,000 tonnes, to 22.2m tonnes, his forecast for Australia's 2009-10 wheat production.