The wheat market has been pulled two ways in recent months with a tussle between investors’ flight to gold in the face of international uncertainty and the fundamental market situation.

The International Grains Council (IGC) reported at the end of July that fundamental factors had reasserted themselves.

“Following June’s steep slide, culminating in the release of very bearishly interpreted official U.S. stocks and plantings data, grain and oilseed export values staged a partial recovery in the past month,” it said. “The rise was attributed to traders correcting oversold positions in the leading exchanges, as well as to renewed U.S. maize crop uncertainties following a spell of hot weather.

“Helping to prevent a more pronounced surge in grain prices was the substantially increased availability of cheaper Black Sea supplies and the generally negative sentiment in financial markets,” it said. “Wheat export prices posted some gains, partly reflecting technical responses in futures markets to the previous month’s heavy falls, but also because of renewed strength in maize and worries about crop quality. Several importers took advantage of offers of Black Sea milling and feed wheat, priced at discounts of up to $50 to other comparable origins.”

As harvesting progressed in the northern hemisphere, traders became more conscious of the potential supply balance issues.

“Concern over wheat quality from the rain delayed German harvest is currently the focus of E.U. wheat markets,” the U.K.’s Home Grown Cereals Authority reported. In a piece written in the fourth week of August, it reported that 20% of the crop still had to be harvested, despite a drier weekend, “most notably in the key exporting regions of northern Germany.”

“Last week the German Farm Co-operative Association decreased its grain production forecast by 900,000 tonnes to 40.3 million (44.2 million tonnes 2010) due to wet weather damaging crops already weakened by dry weather in May/June,” it said.

It cited a report that the French harvest was near completion with the research organization Arvalis saying that protein levels have generally exceeded 11% and specific weights are good.

The USDA’s World Agricultural Supply and Demand Estimates report also noted increased supplies from the former Soviet Union and the E.U.

“The 2011-12 outlook for world wheat trade and consumption this month is shaped by growing supplies of wheat, especially in FSU-12 and E.U.-27, and tighter supplies of corn in the United States,” it said. In the report, the USDA raised its estimate for world 2011-12 wheat production by 9.67 million tonnes to 672.09 million, compared with 2010-11 production of 648.19 million tonnes. The higher estimate was because of “increases in FSU-12, India, China, and E.U.-27 more than offsetting a reduction for Argentina.”

“Russia production for 2011-12 is raised 3 million tonnes on harvest reports for winter wheat and continued favorable weather in most of the country’s spring wheat areas,” it said. “Ukraine production is increased 3 million tonnes on higher-than-expected yields. However, heavy rains during harvest have reduced this year’s crop quality. Kazakhstan production is increased 1 million tonnes on abundant spring and early summer rainfall.”

There was also a rise in its estimate for India’s wheat production of 1.9 million tonnes based on the latest official government estimates, while 1.5 million tonnes was added to China’s production also on the basis of government indications.

For the E.U., they found another 1.4 million tonnes, “with increases for France, Romania and Bulgaria.”

Harvest results from France indicate yields were hurt less by prolonged spring dryness than early reports had suggested, the report said.

“Partly offsetting is a 1.5-million-tonne reduction in expected production for Argentina as the latest planting progress reports suggest less acreage increase this year,” the report said.

Total wheat usage in 2011-12 is put at 674.96 million tonnes, up from an earlier estimate of 670.2 million and the previous year’s 655.31 million tonnes.