Wheat prices have been supported by a nearly 6 percent decline in world wheat production and the expected decline in U.S. and world stocks. Those inventories, however, are expected to be at generally adequate levels.  More recent concerns center on the poor condition of the U.S. winter wheat crop and whether Russian wheat production will rebound in 2011, notes Good.

"Prices of all three commodities declined sharply last week. The turn to lower prices was attributed to China's move to increase interest rates and presumably slow the rate of domestic economic growth. Such a slowdown might reduce the rate of growth in Chinese demand for commodities of all types," he says.

Price weakness may have also reflected some moderation in supply concerns. The U.S. hard red winter wheat crop received some beneficial precipitation, and the USDA increased its projections of some crops outside the U.S. Projections were increased for corn in China, soybeans in South America and wheat in Argentina and Australia, he says.

"There may also be growing concern about the ethanol blender's tax credit. If that credit is not extended, the pace of ethanol production could drop back to the mandated level," he adds.

Finally, a private forecast that U.S. corn producers will increase plantings by nearly 5 million acres in 2011 reminded the market that high crop prices will induce a worldwide supply response next year, he added.

Although the uptrend in prices stalled last week, there is still a lot of uncertainty about crop supply and demand conditions. Uncertainty about Chinese corn demand, ethanol policy, energy prices, weather and acreage may result in large price swings but should provide good support for prices into the end of the year, Good says.