Grain Snippet: Record Crops Keep Pressure on Wheat
Over the past fortnight, the SA and VIC markets have held steady, with increases in global wheat futures offset by a weakening local basis as harvest slowly picks up pace. Since mid-October, ADE basis has softened from 71 USc/bu to 51 USc/bu, while PTL basis has declined from 86 USc/bu to 73 USc/bu. The weakening basis is primarily driven by harvest pressure, with declines partly limited by recent rainfall and low relative grower selling liquidity.
Now that the US government shutdown has ended, the USDA has released the latest World Agricultural Supply and Demand Estimates, showing further increases in global wheat production, ending stocks, and the stocks-to-use ratio. Major wheat exporters are now expected to produce a record combined crop of 420 MMT, up 13 MMT from the previous forecast and 32 MMT higher year-on-year. With this significantly higher output, the stocks-to-use ratio for major exporters is estimated at 17.2%, up 1.3 percentage points from the previous forecast and 1.9 percentage points year on year. This November upward revision indicates that the global wheat balance sheet remains in surplus and continues to pressure global wheat markets. A meaningful rally would require a significant supply shock, yet there is no catalyst on the horizon.
While the large global balance continues to weigh on global futures, the December Soft Red Winter wheat contract experienced a short-term lift starting 22 October. This was mainly driven by fund short-covering and profit taking amid signs of an improved relationship between the United States and China. However, the impact on the SA and VIC markets has been limited, as these geopolitical factors are more likely to influence US growers. Since early November, contract prices have retreated and remained range bound around 540 USc/bu, with China expected to import limited US wheat given relative to their sizable domestic crop. The WASDE report leaves China’s 2025/26 wheat production unchanged at 140 MMT, which is the second largest crop on record. With such a large domestic crop, China’s 2025/26 wheat imports are estimated at 6 MMT, which is subdued compared with the 13 MMT imported in the 2022/23 and 2023/24 seasons.
The wheat harvest is now underway across many parts of Australia, although recent rainfall has caused some delays in southeastern regions of SA. For the 2025/26 season, SA and VIC have encountered several challenges, including a late seasonal break in June and a significantly dry period from September through early October. While the rainfall in late October and early November may help support yields, it has also raised concerns about wheat quality and contributed to further harvest delays. Overall, SA and VIC have experienced an average season, and yield forecasts are near average levels. Nationally, the WASDE report has revised Australia’s wheat production higher to 36 MMT, an increase of 1.5 MMT from the previous forecast, positioning this as the third-largest crop on record.
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