Grain Snippet: Rising Iran Tensions Shake Wheat Markets
Over the past two months, US wheat futures have rallied strongly, driven by managed funds covering their large net short positions amid persistent dry conditions across key US growing regions and escalating tensions in the Middle East. As of 24 February, managed funds were reported to hold approximately 16k net short contracts, among the lowest levels seen for this time of year since 2022.
Despite the rally in US futures, SA and VIC wheat cash prices did not follow suit. ADE prices declined $5/MT, while Portland fell $12/MT. Meanwhile, ADE basis weakened by around 22 USc/bu and PTL basis declined by 70 USc/bu, as exporters were largely covered on their shipping commitments.
Since late January, cold snaps have been reported across key winter wheat regions in the US, EU, and the Black Sea. In the US, frost damage appears to be localised and will become clearer in April. Meanwhile, market reports indicate that winter wheat crops in the EU and the Black Sea are generally well protected by snow cover.
Looking at global winter wheat crop conditions, favourable weather has provided generally good conditions for the Black Sea winter wheat crop. In February, the Russian government has reported strong crop ratings, with 97% of winter wheat was estimated to be in normal condition, compared with 87% a year earlier. Meanwhile, as of late February, French wheat crops were rated 88% good-to-excellent (GD/EX), compared with 74% GD/EX at the same time last year. However, recent heavy rainfall may pose a risk of waterlogging if it persists. That said, EU weather forecasts indicate below-average rainfall ahead, which may allow for some recovery.
In contrast, parts of key US winter wheat regions have received below-average rainfall, raising concerns about potential yield impacts. As of 24/02, 50% of winter wheat was reported under drought conditions, compared with last year’s 22%. This has supported the continued rally in US wheat futures through January and February. Looking ahead, forecasts indicate rainfall across key US growing regions, which could provide some relief.
Australian wheat export demand for 2025/26 has remained strong. From October to December, exports reached 5.1 MMT, second only to the bumper 2022/23 season. WASDE left Australian wheat exports for 2025/26 unchanged at 27 MMT, the highest level in three years. Despite the strong export pace, ending stocks are projected to be 1 MMT higher than last season, indicating sufficient supply to meet current demand.
At the time of writing, the US–Israel conflict with Iran has escalated further, leading to the effective suspension of oil and gas shipments through the Strait of Hormuz. This has pushed crude oil prices higher and provided spillover support to oilseed and global cereal futures markets.
This is a sample only, if you would like to view the entire document and our recommendations, please contact CloudBreak to discuss becoming a member on (08) 8388 8084.