Grain Snippet: Declining Crop Forecasts Whip up Wheat Prices
Since early April, SA and VIC new crop prices have increased by $7/MT, mainly driven by dryness across the East Coast of Australia and stronger global wheat markets, supported by ongoing tensions in the Middle East and persistent dryness in the US winter wheat belt. Globally, wheat futures have strengthened, with December Chicago Soft Red Winter Wheat up 50 USc/bu (8%), December Milling Wheat up $4/MT (2%), and December Hard Red Winter Wheat up 70 USc/bu (11%).
The latest USDA Crop Progress report shows US winter wheat conditions remain historically weak, with only 30% rated good-to-excellent, well below the 2025/26 season at 47% and the 5-year average of 41%. US wheat production for 2025/26 reached a sizable level at 54 MMT, slightly above the previous season and 5.7 MMT above the 5-year average. Whilst USDA forecasts for 26/27 US wheat are yet to be released, the poor crop conditions have led to lower production expectations and have been a key driver for the market rally.
Looking at the global wheat balance, the USDA forecasts 2025/26 production for major exporters at a record 436.6 MMT, a significant increase from 387 MMT in the previous season. This substantial rise in production has also led to higher ending stocks. The USDA estimates major exporters’ ending stocks at 79 MMT, which is 18 MMT higher year-on-year and 16.5 MMT above the 5-year average. These ample stock levels are expected to carry into the 2026/27 season, maintaining a relatively comfortable global supply outlook.
In Russia, wheat crops are generally in favourable conditions due to good weather. Production estimates sit between 87-90 MMT, sitting slightly below the bumper 2025/26 season production. Earlier reports in April from the Russian government indicated winter wheat conditions at 97% good-to-excellent.
The latest European Commission forecast places 2026/27 EU soft wheat production at 125.9 MMT, down 8.4 MMT year-on-year but above the 10-year average of 123.6 MMT. In France, winter wheat crop conditions are reported as favourable at 83% good-to-excellent, up 9 percentage points from the previous season and 2.7 percentage points above the 5-year average. It is worth noting that the EU recorded exceptionally high wheat production in the 2025/26 season.
Geopolitical tensions remain elevated in the Middle East, with the US imposing a naval blockade on vessels departing Iranian ports, while Iran has restricted access through the Strait of Hormuz. At the time of writing, Iran has proposed reopening the strait in exchange for the lifting of the blockade and an end to hostilities, with nuclear negotiations deferred. However, the US has rejected this proposal and cancelled talks in Pakistan, leaving negotiations stalled. The ongoing conflict is causing food price inflation to rise in neighbouring countries, generating regular shifts in market risk sentiment, as well as raising fuel and fertiliser costs around the globe. Australia relies on fertiliser imports; the logistical and cost constraints caused by the conflict could result in lower fertiliser applications or changes to rotations, subsequently leading to lower yields for wheat this season.
Locally, conditions are currently favourable for seeding programs across South Australia, Victoria, and Western Australia, while New South Wales and southern Queensland have been experiencing dryness. The next rainfall event is forecast for early May, with much of the Australian wheat belt expected to receive beneficial rainfall, although parts of NSW and southern Queensland may receive only limited precipitation. Looking further ahead, the potential development of a ‘super’ El Niño is causing concern for Australia’s key growing period, particularly for the already dry regions of NSW/QLD.
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