Weather gives way to Politics

The Arctic blast that swept into the US over the weekend certainly lived up to expectations, delivering a powerful winter storm. Heavy snowfall blanketed much of North America, from Niagara through to Texas. Importantly, the snow has eased concerns around crop-killing temperatures, acting as a thermal blanket and insulating winter crops from the worst of the cold.

A similar story is playing out in Russia. While temperatures dropped sharply, they did not reach winter-kill levels, and the threat of widespread crop damage is diminishing. The seven-day forecast calls for further snowfall, which should provide both ongoing protection and valuable moisture heading into spring. There are reports of ice crusting in parts of Ukraine, although the full impact may not be known until spring.

Black Sea tensions remain an ever-present risk. Hostilities appear to be escalating again, with Ukraine targeting Russian oil assets and Russia striking Ukrainian energy infrastructure. Some analysts see this as a final push to gain leverage at the negotiating table, as talk of a potential deal continues to circulate. Others warn it may simply reflect a grinding continued attrition, with no clear end in sight.

I touched last week on the growing challenges facing the USD. To recap, money supply growth remains rapid, US economic policy has been erratic, interest-rate cuts are increasingly expected, and foreign investment is waning. Together, these factors are weighing on confidence in the world’s largest economy. The AUD has gained around 3c against the USD this week, signalling reduced appetite for the greenback as a safe-haven currency.

At a wheat futures price of 520 USc/bu, the difference between a 0.67 and 0.70 AUD/USD exchange rate equates to roughly AU$12/t (AU$285 versus AU$273). This adds further pressure to domestic prices and makes Australian exports less competitive on global markets.

One of the key reasons wheat prices are sitting at multi-year lows is that six of the seven major exporters harvested near-record crops. Looking ahead, CommBank’s Denis Voznesenski points to a contraction in global production — assuming a return to more ‘average’ yields — alongside rising global consumption. This should provide some underlying price support as we move deeper into 2026.