Except for wheat.
The US HRW drought is increasingly becoming a story in its own right. Crop condition ratings slipped another point to 34% good-to-excellent, implying that two-thirds of the crop is now in suboptimal shape. More concerning is the proportion rated poor to very poor: Kansas at 32%, Oklahoma at 48%, and Texas at 54% highlight the scale of the issue. With little in the forecast to get excited about, expect this story to continue to grow.
Yet, in typical fashion, the wheat market is being pulled in opposing directions. Just last week, the USDA lifted global ending stocks by 6 million tonnes, largely driven by reduced consumption in India, alongside smaller adjustments in Russia and Europe. This leaves the market grappling with a familiar dilemma—ample carryover stocks weighing on prices, while emerging risks like US drought and ongoing fuel and fertiliser disruptions hint at tighter conditions ahead.
That’s the crux of the issue. The market appears either complacent or unwilling to price in forward risk, instead remaining anchored to comfortable old-crop supply.
That dynamic will eventually shift. Attention will soon turn to new crop prospects, particularly with the USDA’s upcoming May report set to deliver the first meaningful projections for the 2026/27 season. Even if the conflict in Iran were resolved immediately, normalisation in fuel and fertiliser supply chains could take months. Early signs of strain are already emerging—per Bloomberg, China’s restriction on sulfuric acid exports, a key input for phosphate fertiliser production, is a case in point.
For now, uncertainty around planted area remains. Northern Hemisphere spring sowing is underway, with corn acreage under close scrutiny. In Australia, wheat area is also expected to come under pressure, with early estimates pointing to a 5–10% reduction.
Looking further ahead, expectations are building for smaller crops across key exporting nations in 2026/27. Canada is forecast to produce 36.6 million tonnes, down from 40.0 million (IGC), while Australia’s crop could ease from 36 to 33 million tonnes. Argentina is also seen declining sharply, from 27 million tonnes to around 20.4 million.
For now, the market remains caught between the weight of current supply and the growing shadow of future constraint.
Wheat market is being pulled in opposite directions
Except for wheat.
The US HRW drought is increasingly becoming a story in its own right. Crop condition ratings slipped another point to 34% good-to-excellent, implying that two-thirds of the crop is now in suboptimal shape. More concerning is the proportion rated poor to very poor: Kansas at 32%, Oklahoma at 48%, and Texas at 54% highlight the scale of the issue. With little in the forecast to get excited about, expect this story to continue to grow.
Yet, in typical fashion, the wheat market is being pulled in opposing directions. Just last week, the USDA lifted global ending stocks by 6 million tonnes, largely driven by reduced consumption in India, alongside smaller adjustments in Russia and Europe. This leaves the market grappling with a familiar dilemma—ample carryover stocks weighing on prices, while emerging risks like US drought and ongoing fuel and fertiliser disruptions hint at tighter conditions ahead.
That’s the crux of the issue. The market appears either complacent or unwilling to price in forward risk, instead remaining anchored to comfortable old-crop supply.
That dynamic will eventually shift. Attention will soon turn to new crop prospects, particularly with the USDA’s upcoming May report set to deliver the first meaningful projections for the 2026/27 season. Even if the conflict in Iran were resolved immediately, normalisation in fuel and fertiliser supply chains could take months. Early signs of strain are already emerging—per Bloomberg, China’s restriction on sulfuric acid exports, a key input for phosphate fertiliser production, is a case in point.
For now, uncertainty around planted area remains. Northern Hemisphere spring sowing is underway, with corn acreage under close scrutiny. In Australia, wheat area is also expected to come under pressure, with early estimates pointing to a 5–10% reduction.
Looking further ahead, expectations are building for smaller crops across key exporting nations in 2026/27. Canada is forecast to produce 36.6 million tonnes, down from 40.0 million (IGC), while Australia’s crop could ease from 36 to 33 million tonnes. Argentina is also seen declining sharply, from 27 million tonnes to around 20.4 million.
For now, the market remains caught between the weight of current supply and the growing shadow of future constraint.
Next week
Chicago (CBOT) is gradually reflecting the plight of the Kansas (KBOT) HRW wheat market. Some subzero temperatures are expected through the HRW wheat belt later this week which is adding to some risk premium being built into the wheat market. Middle East negotiations continue, giving rise to some hope that a resolution is near.
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Click on graph to expand
Click on graph to expand
Data sources: Next Level Grain Marketing, Bloomberg, IGC, Reuters, USDA, SovEcon, Mecardo
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