by John Buckley
Declining world stocks have combined with renewed worries about weather damage to top exporter Russia’s crop to drive wheat prices to four-month highs in early February. Forward futures have been pointing six percent to 12 percent higher still, suggesting the more bullish trend could last well into 2026. While some major exporters – Australia, Canada, Argentina and the US – have seen good crops this season, the full extent of Russian damage from an earlier drought and subsequent freezing weather probably won’t be fully known until the spring at least. Speculative funds who had been betting on further wheat price falls, have been caught out by these developments, recently forced into a hefty, short-covering spree that has helped push the bull run along in Chicago futures and other wheat markets Analysts might argue about just how important global stock/use ratios are to pricing of crop-based commodities. It’s theoretical figure, conflating Northern and Southern Hemisphere ends of seasons up to half a year apart – so not literally applicable to any given point in time. Still, stocks have been contracting for quite some time, recently reaching their lowest level since 2007/08 in terms of estimated global consumption, something the markets can’t brush off.
Along with the recent price rise, a tighter market might seem a strong incentive for farmers globally to increase sown areas for wheat. However, the largest share of the world wheat crop – autumn sown in the Northern Hemisphere – is already in the ground. So much of any supply response must wait until the 2026/27 marketing year, hence the even firmer look to those distant futures.
Russia’s 2024 crop was recently estimated about 10m tonnes smaller than the previous year’s at some 81.5m, pointing to a similar drop in 2024/25 exports to about 45.5m, according to the USDA’s latest world view. Some Russian analysts are lower still, estimating no more than 43m. Persistent dry conditions in some of its key growing areas are not promising for 2025 yields either. Local analysts Sovecon recently forecast current season’s total exports would drop to 38.3m tonnes amid a lower crop and carry-in stocks from last year. Under the best-case scenario, the crop could reach 87/89m tonnes but
under the ‘pessimistic’ outlook as little as 77/79m. The market has taken some time to fully respond to this potentially bullish outlook, partly because Russia’s old crop exports were unusually strong, reaching a record for the July/Dec period at 28.5m tonnes and perhaps lulling traders into a false sense of security.
Russian analysts reckon that the annexation of parts of Ukraine has added about 5m tonnes to Russian crop potential.
Even with that, exports may be curbed as the government maintains a tighter hold on supply to prevent domestic shortages contributing to already strong domestic food price inflation – at least until more is known about the 2025 crop. The estimated transfer of some Ukraine crop potential to Russia also means a likely drop in the former’s export contribution in the 2025/26 season. Ukraine’s 2024/5 exports are already seen about 2.5m tonnes lower than in 2023/24.
After its own poor 2024 crop, Europe’s 2024/25 wheat exports have been expected to drop by around 10m tonnes. However, larger sown area and more normal weather/yields could enable a better performance in 2025/26 and perhaps a significant comeback in exports. Top EU wheat producer France is expected to have sown about 10 percent more wheat. However, the EU harvest is too far away to count on anything at this stage.
Some of the pressure has been taken off the 2024/25 global trade balance by expected bigger contributions from other traditionally large exporters. Australia had been expected to have about 2.5m more exports than last year but could have considerably more after recent good rains raised yield prospects. Some Australian private analysts recently forecast the crop could go as high as 35.5m compared with official estimates around 32m.
The USA and Argentina were expected to boost their 2024/25 exports by about 4m tonnes each. Argentina’s recent decision to lower export taxes may also help keep it among the cheapest suppliers, further helping to impart some price restraint. US is also estimated to have sown about two percent more winter wheat for 2025, a bit more than earlier expected. While it has had some dry weather issues, the outlook there appears to be improving. Canada (expected to export about 1m more than last season) may also sow more of its main spring wheat crop this year in response to the higher prices.
A squeeze on global exportable supplies might also be eased somewhat by forecasts that global imports will drop by about 12m tonnes – led by smaller Chinese, Turkish and some Asian buyers’ needs. China has even delayed some, mainly Australian import cargoes and was hoping to divert these to other Asian markets, apparently amid adequate domestic wheat supplies. The latest USDA view has China importing as little as 8m tonnes compared with last season’s 13.6m (when it was the world’s top importer).
The markets will also have to keep an eye on India, the world’s third largest wheat producer. A once huge importer – but in most recent years self-sufficient – India’s security stocks have been falling sharply. Will it lead to renewed imports or will its approaching harvest avoid that? In a potentially tighter year for the world wheat market, India’s needs could become a sensitive issue.
Based on information on sown areas and weather conditions in major cropping regions, the International Grains Council recently saw global wheat output tentatively rising to a record 805m tonnes in 2025/26, (+1% on-year). However, such a small gain in relation to forecast rising consumption would still result in a further drawdown in end-season stocks.
Maize supply outlook tightens
Several factors have combined to present a tighter supply outlook and much higher prices for main feed-grain maize in recent weeks. First was a surprise decision by the US Agriculture Department to slash its estimate of the US 2024 corn crop from 384.6 to 377.6m tonnes – quite an unusual move this late in the season but based on lower-than-expected average yields (far outweighing a small increment to the harvested area estimate). Based on current estimates of demand for US maize, it suggests seasonal ending stocks will not stay level with last year’s, as expected earlier, but dip by about 5.5m tonnes. Underlining that trend, US exports so far this season are already performing better than expected, sales to date running 28 percent higher than at this time last year amid slower sales by Latin American export rivals.
Argentina, the world’s third largest corn supplier, has suffered a prolonged period of dryness, threatening significant yield loss. Far from expanding its crop from 50m to 51m tonnes, it might end up with something closer to 46/47m, according to some local analysts. Neighbouring Brazil’s crop scouts are also getting apprehensive about too much rain slowing the soybean harvest and delaying planting of second-crop corn (planted on the same land after the soya crop). So, Brazil’s hopes for a possible 126/127m tonne crop (versus last year’s 122m) may also be at risk, some local analysts already looking for 125m or less. The second crop also tends to be the largest factor in Brazil’s corn exports.
With European, Ukrainian and Russian maize output already well down year-on-year, it could mean lower than expected global production (already forecast down by almost 18m tonnes) and, with consumption estimated up by 19m tonnes, a significant (25m tonne) drop in carryover stocks into the new 2025/26 marketing year (starts September 1).
The bellwether Chicago futures market has already proved sensitive to this tightening supply outlook, speculative funds building a record large gross long position in futures and options, betting on prices going higher. Chicago nearby months are already at their highest since October 2023, having recently mudged $5/bushel versus $4 in October and as little as the $3.60’s last summer. As in the wheat market, forward futures suggest the firm market will continue in the year ahead.
On the plus side for supply, the corn/soya price ratio is favouring the coarse grain over the oilseed, so US farmers could plant more corn than expected this spring. Last year they cut planted area from 94.6m to 90.6m acres. Growing costs, though still high, have eased somewhat for corn – a more input heavy crop than soybeans while crop rotation issues can also skew the outcome. A clearer picture should be available from the USDA’s Outlook Forum in late February and the USDA’s Prospective Plantings Report published on March 31. There has also been talk of a modest rise in Ukrainian maize sowings while Europe may be hoping for some recovery after its lower crop in 2024.
Weather trims still large global soya crop
The outlook for oilmeal costs remains promising amid the approach of what still looks to be a record large world soybean crop. The USDA and other local analysts have trimmed the expected total by about 3.5m tonnes this month but at almost 421m, it remains some 26m bigger than last year’s. With its high meal content, soya should contribute about 274.6m tonnes to the protein total versus last year’s 260m and under 250m in the preceding three seasons. That far outweighs some modest reductions in the prospective output of the other leading oilmeals – sunflower and rapeseed – alongside mostly steady supplies from the smaller oilseed sectors.
US soybean futures values have been moving up for most the year to date, largely due to worries that a dry heatwave will trim Argentina’s crop. As we go to press, some local analysts are forecasting a harvest there as low as 47.5m tonnes versus original hopes for something closer to 51m or 52m (versus last year’s 48m and the previous season’s drought-hit 25m tonnes). However, a recent wetter trend might yet salvage something closer to the 49m forecast by the USDA in mid-Feburary. Either way, the Brazilian crop still seems on course for a new record peak of 169/172m tonnes – far above last year’s 153m and the sub 140m tonne figures of most recent years. Along with last year’s bigger US crop (plus 5m tonnes), it maintains the outlook for some soybean stock accumulation as supply exceeds demand. That, in turn, could mean US framers sow less beans this spring, turning to maize instead. However, at this stage there seems no real threat to overall supply of beans or meal – why US meal futures values have been slower to rise in recent weeks and are not much more expensive for the more distant months.