This year only the high-protein wheats looked vulnerable to both downside from falling futures and erosion of the premium (basis) as more and more higher protein wheats came in from the southern harvest. As a result, selling APH, H1 and H2 appeared to be warranted during harvest.

In the end it has been H2 which has shown the most weakness, and has failed to recover on the 'new year' bounce up in prices. Other grades in most port zones have had a nice recovery from harvest lows, with some grades trading back up to the harvest average for a few days already.

So far the lift in prices has been driven by a lift in US futures prices. Basis levels have remained weak apart for ASW, where the discount to APW has lifted significantly since bottoming out during harvest.

As the January-March period rolls on, more volatility in US futures is expected, allowing prices to move up and down, as well as an improvement in basis levels as exporters begin to chase more wheat again for shipments booked for late autumn and early winter.

Hopefully the level of exports from the Black Sea region will begin to wane as well, allowing our wheat to move into more milling wheat markets. This would also tend to allow basis levels to improve as world wheat prices shake off the discounts being applied by Russian (and also Argentine) exporters.

So far we have had a good rally from harvest lows.

Some grades have already seen gains of close to $20/t before pulling back as the rally ran out of steam.

It is important that sales be made on such rallies. We are still not getting any signal that the grain markets have hit their nearby lows and are entering a period of sustained upside.

This week's USDA reports are likely to set the direction for corn and soybean prices, and that in turn will influence wheat. In each of the past five years, the January set of reports has triggered limit up or down moves in corn and soybeans. This year may be no different, with little to indicate which way it might go.