CONTINUING uncertainty over the size of wheat production in Europe has led to grain prices rising for a fourth consecutive week.

Drought in parts of Russia, Ukraine and Kazakhstan, along with growing fears over the size of the German crop, has spooked the markets.

Analysts expect the German wheat crop could be 10 to 20 per cent smaller than last year. These European factors have wrestled control of grain markets from the US.

Last week, rising wheat prices in Europe triggered price hikes in the US.

Wheat futures in Chicago have increased 23 per cent in the past four weeks.

The world's cheapest wheat is not so cheap any more. Egypt has been buying wheat from Russia in regular tenders and last week paid $30.65 a tonne more than three weeks ago.

Traders are saying it will take a few more weeks to learn what actual damage has been caused to grain crops in Europe with some bearish commentators suggesting the reports of drought in Europe may be extreme. If the reduction in crop production eventuates, Australian grain should be better placed to access markets in Africa and the Middle East.

Fortunately for domestic grain buyers, the impact on grain prices in southeast Australia has been much less dramatic thanks to the corresponding lift in the Aussie dollar.

In the three weeks to Monday, the Australian dollar had appreciated US5.2c to US89.6c.

Export prices for old-crop grains are firmer. Most grades of wheat are $5 a tonne higher this week with APW reaching $230 a tonne delivered to Melbourne and Geelong ports.

F1-grade feed barley is up a sharp $14 a tonne this week to $184 a tonne delivered to Geelong or $180 a tonne delivered to Portland.

Old-crop grain prices for stockfeed have lifted. Early this week, buyers were

paying $230 a tonne for GP-grade wheat, or better, delivered to Melbourne mills. F1-grade feed barley remains unchanged at $180 a tonne delivered to Melbourne mills this week.

The world wheat markets have taken the lead in price hikes and corn and soybean markets have followed.

Strong demand for oilseeds and coarse grains is also supporting these price movements.

Old-crop canola is $10 a tonne higher this week while new-crop canola prices are up slightly to $510 a tonne delivered to Geelong, $513 a tonne delivered to Melbourne and $508 a tonne delivered to Portland.