Grain Snippet: Rain Brings Relief – Wheat Prices Sigh
Over the past month, SA and VIC wheat prices have traded within a $15/MT range. In the first half of May, SA and VIC prices increased to $360/MT and $375/MT respectively. The rally underpinned by stronger futures markets on the WASDE report release, which forecast a substantial 48MMT y/y decline in production from major wheat exporters. However, these gains were somewhat short-lived, with the market reacting to the lacklustre outcomes from the first day of talks between Trump and Xi, along with some recent precipitation received across dry Australian growing regions. As a result, SA and VIC prices returned to levels of $345/MT and $352/MT respectively.
SA and VIC cropping regions are generally tracking well so far this season. While April conditions were relatively dry, rainfall received during February, March, and May has significantly improved soil moisture profiles and supported early crop establishment. Consequently, local basis levels have remained relatively weak. Across NSW and southern Queensland, dry conditions persisted through the pre-seeding and seeding period. However, timely rainfall throughout May have provided much-needed relief and improved planting conditions. Looking ahead, rainfall forecasts over the next fortnight remain favourable across most Australian cropping regions, including areas that have recently been moisture stressed. Should these forecasts materialise, SA and VIC wheat prices may come under some short-term pressure, while basis levels are expected to remain subdued. Over the longer term, BOM forecasts continue to indicate the potential development of a ‘super’ El Niño event later in the year. This raises the risk of warmer and drier conditions, along with elevated frost risk during the critical growing period, which could lead to production concerns later in the season.
The latest US winter wheat crop conditions are reported at 26% GD/EX, reflecting some of the weakest crop conditions seen in recent decades. The deterioration has been largely driven by persistent dryness across key winter wheat growing regions. That said, forecast precipitation across parts of the US winter wheat belt is expected to improve soil moisture conditions and provide some relief to crops, weighing on wheat futures. From mid-May to date, Dec’26 Soft Red Winter wheat and Hard Red Winter wheat futures have declined by 16 USc/bu and 55 USc/bu respectively.
Russia’s 2026/27 winter wheat crop conditions are currently reported as favourable. As a result, Russian wheat production is forecast higher to 89.7MMT, up 2.1MMT from previous estimates and slightly above the 2025/26 season. That said, Russia’s spring wheat seeding progress remains significantly delayed, currently tracking around 50% behind the same period last year.
The Strait of Hormuz remains a major geopolitical focus for the market due to its importance to global fertiliser and energy supply chains. Although another round of negotiations regarding a potential reopening is ongoing, uncertainty remains high regarding the final outcome. Given Australia’s reliance on imported fertiliser, prolonged disruption and subsequently elevated import costs would sustain pressure on local fertiliser availability, whilst keeping prices high. This may lead to reduced fertiliser application rates, potentially impacting Australian wheat yields later in the season.
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