Phil Lindsay of Ord Minnett Jardine Fleming Futures sees wheat prices continuing to head toward A$162.00 after a bottoming of the world market in the past few weeks.

The next target after A$162 would be A$174.00, he said. Last week wheat futures prices on the Sydney Futures Exchange firmed significantly, with harvest month January 1999 rising to A$158.50 a tonne from A$152.25.

Physical prices for Australian Standard White improved by a couple of dollars to about A$150.00 last week, in line with the rise in wheat futures.

However, the weather has not been kind and is producing variable results in different parts of Australia. Feed wheat in Queensland fell heavily by A$10 a tonne to A$112 Brisbane last week as the rain affected crop appeared likely to produce 200,000 tonnes to 300,000 tonnes of feed wheat, traders said.

At the same time the newbuoyancy in Australian Standard White wheat prices was last week boosted further by a widespread frost across the Western Australian grainbelt.

The extent of damage after temperatures reached minus two degrees celsius would not be known until the end of next week, agricultural futures broker Lindsay said.

"It is difficult to assess the significance of damage."

Too much rain in Queensland is producing much low protein wheat as harvest begins, with traders not being able to find enough high protein good quality wheat.

This was producing panic covering in futures, Lindsay said. The physical market at the close of last week was very thin as traders assessed the situation in North America, Argentina, and Australia, he said.

The softer Australian dollar was further increasing new buoyancy for wheat, he said. Sally Bucknell of New England Agricultural Traders said unexpected large tonnages of Queensland feedwheat were responsible for driving the feed market down.

Queensland rain had also seriouslydisrupted markets in chickpeas, faba beans and other crops. "Growers are not in a selling mood," Jack Faye of New South Wales grains co-operative GrainCorp said of standard wheat.

Firmer wheat prices last week occurred ironically as the Australian grains trade was warned by the Australian Bureau of Agricultural and Resource Economics (ABARE) of weaker prices in 1998/99 and increased competition for Australian wheat exports.

ABARE, however, said that increasing competition and reduced demand in Australia's major markets were expected to more than offset the positive effect on prices from the lower Australian dollar.

Australia is heading toward a near-record harvest forecast by ABARE at 23.5 million tonnes. Australia's annual wheat harvest is underway in central Queensland and expected to begin toward the end of October in New South Wales.