"Prices may remain generally high, but very volatile as 2008-09 production prospects, both acreage and yield, unfold," said Darrel Good. "The USDA's Winter Wheat Seedings report, to be released the second week in January, will provide the first indication of how U.S. producers responded to the high prices."

Good's comments came as he reviewed the recent history of wheat prices, which moved to all-time highs this fall, with December futures at Chicago reaching $9.60. New crop July 2008 futures traded to a high near $6.95.

"Prices have softened over the past week as the market begins to anticipate some slowdown in consumption and that the small 2007 crop has been fully reflected in current price levels," said Good. "Decisions in the European Union to allow import licenses for 20 million bushels of corn and eight million bushels of sorghum could help ease the tightness in the supplies of feed wheat there.

"In addition, the recent Canadian estimate of the current crop there was a bit larger than expected. Improved weather in Argentina and ideas that the drought damage to the Australian crop has been fully anticipated by the market also contributed to recent price weaknesses."

Prices for the 2008 crop remain well below prices for the 2007 crop as the market anticipates an increase in world wheat acreage in 2008, motivated by the historically high prices, Good noted. In addition, an increase in acreage in the European Union will be accommodated by the lifting of the 10 percent acreage set-aside requirement.

"The acreage response to high wheat prices will unfold over a fairly long period of time," said Good. "Winter wheat producers in the northern hemisphere have the first opportunity to respond to the higher prices as seeding is underway.

"For example, the USDA reported that 42 percent of the U.S. winter wheat crop had been seeded as of Sept. 30. Seeding now likely exceeds 60 percent. Private sources forecast that soft red winter wheat producers are likely to make the largest percentage increase in acreage due to the combination of high wheat prices and the potential opportunity to double-crop some of those acres to high-priced soybeans."