The “Boy Who Cried Wolf” feels like an increasingly apt analogy for both sides of the Iran conflict. This week alone we have heard repeated claims that the conflict is over, the Strait is reopening, diplomacy has prevailed and only minor details remain — only for the opposing side to immediately contradict the narrative. Markets are being lulled into a false sense of security by rhetoric that, so far, has delivered little substance.
As the conflict drags on, fuel prices remain elevated. Less obvious — but arguably just as important — is the price of heavy crude, or bunker fuel, which powers the world’s bulk shipping fleet. Singapore remains the key global bunkering hub and is heavily reliant on crude flows moving through the Strait of Hormuz. Prices have become exceptionally volatile, driven both by geopolitical headlines and the physical squeeze created by tighter supplies. This adds another layer of price risk for shippers and consumers alike. With a return to normal trade flows now looking unlikely before August at the earliest, there are likely a number of secondary consequences the market is yet to fully appreciate.
Wheat markets finally tipped lower this week, with the Dec ’26 CBOT contract shedding 42c/bu since last Wednesday. A combination of ceasefire headlines, improving crop conditions and the approaching Northern Hemisphere harvest has combined to take the heat out of the rally.
The demand side of the equation will be particularly interesting to watch from here. Key importers such as Türkiye and Morocco have both recorded above-average seasons, with Türkiye reportedly considering an import ban while it assesses the size and quality of its domestic crop. Should that occur, traditional suppliers into the MENA region — Black Sea exporters, France and others — may need to search further afield to maintain export share.
Russian production prospects also continue to improve on the back of better weather. Their spring planting campaign has recovered strongly after early delays and is no longer considered a major concern. Importantly, the southern cropping regions — closest to export terminals — currently hold the strongest yield potential. That contrasts sharply with last season, when grain had to be hauled from Central and Siberian regions to keep export channels supplied. Current production estimates range from 87mmt (USDA) to above 90mmt (SovEcon), while one analyst suggested 95mmt may even be achievable. For all the discussion around US harvest concerns, another large Russian crop could quickly spoil the bulls’ party.
China looks to be needing a wedge of high protein milling wheat if stories of the wet harvest continue to be true. Last year China imported around 6mmt of wheat, mostly from Australia, the US and Canada. If Beijing follows through on recent commitments to increase US agricultural purchases, wheat could quickly become a key component of that trade flow. Such a shift may leave other exporters scrambling to replace what has traditionally been a highly reliable and strategically important customer.
Next week
The market peak now appears behind us. Harvest pressure will mean that prices – in the absence of any external factors – follow the path of least resistance and the North’s crop comes off.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released it’s June Crop Report last week, and it looks like the energy crisis
International wheat markets continue to bounce around, looking for a level as the northern hemisphere harvest approaches. Locally price spreads have ballooned, but then it
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Power plays
As the conflict drags on, fuel prices remain elevated. Less obvious — but arguably just as important — is the price of heavy crude, or bunker fuel, which powers the world’s bulk shipping fleet. Singapore remains the key global bunkering hub and is heavily reliant on crude flows moving through the Strait of Hormuz. Prices have become exceptionally volatile, driven both by geopolitical headlines and the physical squeeze created by tighter supplies. This adds another layer of price risk for shippers and consumers alike. With a return to normal trade flows now looking unlikely before August at the earliest, there are likely a number of secondary consequences the market is yet to fully appreciate.
Wheat markets finally tipped lower this week, with the Dec ’26 CBOT contract shedding 42c/bu since last Wednesday. A combination of ceasefire headlines, improving crop conditions and the approaching Northern Hemisphere harvest has combined to take the heat out of the rally.
The demand side of the equation will be particularly interesting to watch from here. Key importers such as Türkiye and Morocco have both recorded above-average seasons, with Türkiye reportedly considering an import ban while it assesses the size and quality of its domestic crop. Should that occur, traditional suppliers into the MENA region — Black Sea exporters, France and others — may need to search further afield to maintain export share.
Russian production prospects also continue to improve on the back of better weather. Their spring planting campaign has recovered strongly after early delays and is no longer considered a major concern. Importantly, the southern cropping regions — closest to export terminals — currently hold the strongest yield potential. That contrasts sharply with last season, when grain had to be hauled from Central and Siberian regions to keep export channels supplied. Current production estimates range from 87mmt (USDA) to above 90mmt (SovEcon), while one analyst suggested 95mmt may even be achievable. For all the discussion around US harvest concerns, another large Russian crop could quickly spoil the bulls’ party.
China looks to be needing a wedge of high protein milling wheat if stories of the wet harvest continue to be true. Last year China imported around 6mmt of wheat, mostly from Australia, the US and Canada. If Beijing follows through on recent commitments to increase US agricultural purchases, wheat could quickly become a key component of that trade flow. Such a shift may leave other exporters scrambling to replace what has traditionally been a highly reliable and strategically important customer.
Next week
The market peak now appears behind us. Harvest pressure will mean that prices – in the absence of any external factors – follow the path of least resistance and the North’s crop comes off.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Click on graph to expand
Data sources: Next Level Grain Marketing, Bloomberg, USDA, Reuters, Sov Econ, Mecardo
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Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
Listen to the podcast
Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
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Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
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We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.