Grain Snippet: Wheat Market Cools as Supply Builds
The June USDA report highlighted higher wheat production but a tighter balance sheet for the 2025/26 season. Production among major wheat exporters is estimated at 396.33 MMT, up 2.42% (9.37 MMT) y/y, primarily driven by increased output in the EU. Despite the y/y rise in production, the USDA projects the 2025/26 wheat stocks-to-use ratio for major exporters at 15.9%, down slightly from the 2024/25 season’s ratio of 16.05%, due to higher export forecasts.
In the recent EU Commission report, EU wheat yields were revised 1% higher y/y, as the southern and eastern regions benefited from increased rainfall. This brings total wheat yields up 9% y/y. In late June, the EU Commission revised its soft wheat production forecast to 128.2 MMT, up 1.58% (2 MMT) from the previous estimate and 15% (16.5 MMT) higher than last year. The EU wheat harvest is now underway, and the market is expected to see increased availability of EU wheat.
In the 25/26 season, Russian wheat crops are marked by below-average soil moisture conditions. As a result, Russian wheat production is estimated at 83 MMT, below the 5-year average of 85.12 MMT. However, this represents a 1.6 MMT y/y increase, supported by some rainfall between March and May that helped improve soil moisture. Currently, the Russian wheat harvest is underway, with new crop wheat FOB prices reported at a competitive $226 USD/MT.
The June StatsCan report left Canada’s wheat production forecast unchanged at a positive 34.73 MMT, which is 0.2 MMT above last year’s production. However, wheat crop conditions in Saskatchewan are below last year’s levels for the same period. The Saskatchewan government reported spring wheat conditions at 55% GD/EX, down 32 points y/y and 23.6 points below the 5-year average. Dryness is emerging in key wheat-growing regions, which may offer some market support; however, recent rainfall may help elevate soil moisture, and there is still time for weather conditions to improve prior to harvest.
With a stronger production outlook y/y for major wheat exporters, December US SRW wheat has continued its medium-term downward trend since February. Although contract prices rallied in late June due to the conflict between Israel and Iran, they have since given back all those gains following a ceasefire. Over the same period, managed funds have reduced their net short positions from 120k to around 71k contracts since May on profit-taking. While net-shorts remain relatively large, setting the stage for a potential short covering rally if fundamentals shift, funds also have room to expand their short positions if no bullish catalyst emerges.
Both ADE and PTL new crop APW1 prices are down m/m by $10/MT and $4/MT, at $352 AUD/MT and $353 AUD/MT respectively, with the local basis remaining relatively strong for this time of year. The decline is mainly driven by lower global futures and a stronger AUD, coupled with the outlook of larger overall global wheat supplies amid the major exporters. Despite the dry start to 2025 for much of SA and Vic, the wheat market sits under the pressure of higher y/y wheat production for major global exporters and present harvest pressure from the Northern Hemisphere winter crops.
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