It feels like we've all endured a fair dose of political fatigue over the past couple of months after significant changes across the national and international stage, so I thought it might be a good time to focus on what's directly in front of us. As discussed in recent newsletters, the traditional seasonal peak in wheat futures appears to be behind us (although that doesn't mean we won't see another peak further down the track).
Since May 20th, Dec ’26 CBOT wheat futures have fallen more than 116c/bu, equivalent to roughly AU$44/t. While the catalyst has largely been calendar-driven, ongoing peace negotiations, improving crop prospects and end-of-month profit-taking have all helped accelerate the decline.
The slide in prices has been quite remarkable. One could argue we are rapidly approaching oversold territory and due for a bounce. The global wheat balance sheet is still expected to tighten, and there remain plenty of moving pieces. One worth watching is the Russian spring wheat crop. SovEcon reports that planted area, while making significant progress, continues to lag and could end up being the smallest since 2018. Part of the reason is the shift away from wheat and into more profitable crops such as sunflowers. It’s certainly one to keep on the radar.
Conditions in Canada have improved considerably. Rain arrived in areas that desperately needed moisture, while regions that were already too wet largely stayed dry. Seeding progress remains slightly behind average, but overall crop conditions are favourable and much of the crop is being planted into good moisture profiles. Wheat area is expected to be down 7% from last year, while canola area is forecast to increase by 10% and barley by 3%. Interestingly, one report suggested lentil area could decline, which is completely at odds with what we are seeing here in Australia.
Despite the anticipated increase in canola area, export volumes may not necessarily rise. The recently announced US biofuel policy has sent Canadian crush margins soaring to around CA$280/t. With domestic crush capacity sitting at roughly 14-15 million tonnes, processors are expected to operate at or near full capacity. This should provide underlying support for canola prices over the medium to longer term.
With everything else going on, the US has chosen a curious time to pick up the tariff strategy once again. This time, it has invoked Section 301 of the 1974 Trade Act against a range of countries, including Australia, that have allegedly failed to prevent goods linked to forced labour from entering their supply chains. In practical terms, countries importing products that may have been produced using cheap or forced labour could face tariffs of up to 12.5%.
The US has also targeted Brazilian imports with a proposed 25% tariff, specifically aimed at ethanol exports in a direct challenge to Brazil’s biofuel industry. The justification includes concerns around deforestation, digital trade practices and what the US describes as ongoing unfair trade barriers that restrict American exports.
Next week
Markets are inevitably caught up in the loop of geopolitics. The new tariff front rattled markets and has helped to see commodities remain under pressure. Expect prices to stabilise for a period after this sell-off, but will likely remain under pressure as the Northern Hemisphere crop comes off.
The United States Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) Report was released on Friday, showing a tightening trend across wheat
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.
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.
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.
Try as you might, markets can’t escape politics
Since May 20th, Dec ’26 CBOT wheat futures have fallen more than 116c/bu, equivalent to roughly AU$44/t. While the catalyst has largely been calendar-driven, ongoing peace negotiations, improving crop prospects and end-of-month profit-taking have all helped accelerate the decline.
The slide in prices has been quite remarkable. One could argue we are rapidly approaching oversold territory and due for a bounce. The global wheat balance sheet is still expected to tighten, and there remain plenty of moving pieces. One worth watching is the Russian spring wheat crop. SovEcon reports that planted area, while making significant progress, continues to lag and could end up being the smallest since 2018. Part of the reason is the shift away from wheat and into more profitable crops such as sunflowers. It’s certainly one to keep on the radar.
Conditions in Canada have improved considerably. Rain arrived in areas that desperately needed moisture, while regions that were already too wet largely stayed dry. Seeding progress remains slightly behind average, but overall crop conditions are favourable and much of the crop is being planted into good moisture profiles. Wheat area is expected to be down 7% from last year, while canola area is forecast to increase by 10% and barley by 3%. Interestingly, one report suggested lentil area could decline, which is completely at odds with what we are seeing here in Australia.
Despite the anticipated increase in canola area, export volumes may not necessarily rise. The recently announced US biofuel policy has sent Canadian crush margins soaring to around CA$280/t. With domestic crush capacity sitting at roughly 14-15 million tonnes, processors are expected to operate at or near full capacity. This should provide underlying support for canola prices over the medium to longer term.
With everything else going on, the US has chosen a curious time to pick up the tariff strategy once again. This time, it has invoked Section 301 of the 1974 Trade Act against a range of countries, including Australia, that have allegedly failed to prevent goods linked to forced labour from entering their supply chains. In practical terms, countries importing products that may have been produced using cheap or forced labour could face tariffs of up to 12.5%.
The US has also targeted Brazilian imports with a proposed 25% tariff, specifically aimed at ethanol exports in a direct challenge to Brazil’s biofuel industry. The justification includes concerns around deforestation, digital trade practices and what the US describes as ongoing unfair trade barriers that restrict American exports.
Next week
Markets are inevitably caught up in the loop of geopolitics. The new tariff front rattled markets and has helped to see commodities remain under pressure. Expect prices to stabilise for a period after this sell-off, but will likely remain under pressure as the Northern Hemisphere 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
Categories
Have any questions or comments?
Black Sea Risk Rises
To paraphrase the old Footy Show, it’s been a BIG week in grain markets. It all kicked off last Friday with the USDA’s July supply
Global wheat and corn supplies edging lower.
The United States Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) Report was released on Friday, showing a tightening trend across wheat
Weather wobbles
All the major agricultural commodities had their turn in the spotlight this week. Corn and soybeans led the AG complex higher early on, driven by
Selective pulse planting reactions
It seems an age ago now, but back at winter crop planting time, there were all sorts of decisions being made around rising fertiliser and
Want market insights delivered straight to your inbox?
Sign up to the mailing list to get regular updates to new analysis and market outlooks
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.
MEET THE TEAM
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.
SERVICES AND CAPABILITIES STATEMENT BROCHURE
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.