The world wheat market is showing signs of stabilising, as the plunge in prices – down 30% in three months – raises fears that farmers will cut back on plantings, Australian grain handler AWB has said.

Wheat buyers, who AWB reported two weeks ago as confident of continuing supplies, were beginning to show signs of jitters at the prospect of a second successive year of lower plantings.

"With wheat so cheap farmers will sow less again for next season and customers are just starting to get nervous at what that might mean for wheat availability next year," said AWB general manager commodities, Mitch Morison.

"The price signal simply has to be there to encourage greater production."

'A lot of risk' 

Russian intervention buying of grain, coupled with the prospect of the El Nino weather pattern damaging Australia's crop, were also supporting prices.

"We know there is a big crop in the world this year, but there remains a lot of risk for the Australian crop," Mr Morison said.

"The assumptions that Australia will add substantial tonnage to the world surplus may be a little overdone."

He added that while there was plenty of wheat available at present, "if northern hemisphere growers cut back it might be a different picture by the time a lot of the Australian crop is being harvested and sold".

Australia's harvest typically runs from November to January.

End of the bear run?

The comments came as AWB, Australia's former wheat monopoly, said it was keeping its forecast for 2009-10 wheat pool returns steady, after two previous reductions this month.

Chicago's September wheat contract stood at $4.64 a bushel on Monday, down from $6.77 a bushel at the start of June.