Natalja Skuratovic
Senior Account Executive
EarthDaily Agro
As extreme weather and geopolitical tensions present challenges to global food security, the global grain market is facing significant hurdles. Wheat prices are rising, with supply chain disruptions, climate unpredictability, and political volatility contributing to the urgency of the situation. It is unclear whether the upcoming season will meet demand, or if the pressure will continue to mount. Here’s a closer look at the factors shaping the future of grain.
In today’s markets, following weather developments and their impact on crops is essential. The primary reason is that this information is foundational for fundamental analysis, which links price movements to changes in supply and demand conditions. While technical analysis may provide guidance for short-term trades, it is the fundamental factors—particularly supply and demand—that ultimately drive long-term price movements.
RUS - WINTER WHEAT - Early cycle Precipitation
On the supply side, production volatility plays a critical role in determining prices. For example, a late frost in the Black Sea region can trigger significant price increases, as seen in May last year, by reducing available supplies. In contrast, demand tends to be more stable and less susceptible to dramatic fluctuations.
Currently, the market is starting to acknowledge the ongoing dryness in Russia’s Black Sea region, which is hindering the sowing of winter grains, particularly winter wheat. With the ideal sowing window approaching its end, the forecast for the next 10 days, according to the ECMWF weather model, offers little hope for relief.
The dry conditions in southern and central Russia have also severely impacted the corn crop this year, which could see a nearly 30% decline from last year’s levels, dropping to around 11.9 million tons according to SovEcon estimates.
RUS - CORN - Past Precipitation
While in the U.S. 2024 harvest hits high gear across the country harvesting what is set to become a record corn crop and a very good winter and spring wheat crops, over in Brazil, dry weather remains a main concern for the markets. The persistently dry conditions have slowed the planting pace of the summer corn in Brazil significantly below the last year number, potentially exposing the later planted crop to the unfavorable weather conditions throughout the growing season.
Let’s focus on the wheat market, especially since this is typically the time of year when prices begin to rise. Current market conditions warrant a closer look. Persistently wet weather in the EU brings to mind last year’s wet autumn, which led to a 7-8 percent reduction in winter wheat plantings in France and Germany. Coupled with poor growing conditions, this ultimately resulted in subpar production for the EU’s top two wheat producers during the last growing season.
The quality of French and German wheat in the past season has declined due to wet conditions and limited solar radiation (as shown in the graphs below), and is, as they say, ‘not au rendez-vous’—pardon my French. French wheat is losing its position as a major supplier to North Africa, increasingly being displaced by Black Sea origin wheat. According to the European Commission, as of September 29 in the 2024/25 marketing year, the EU has exported 6.14 million tons of wheat, a decrease of 25% compared to the same period last year.
Now that the macro-economic environment is starting to favor commodities yet again with a weaker U.S. dollar and Chinese stimulus measures, the Bloomberg Commodity Index gained 4,4 percent in September – its best performance since February 2022, and hedge funds have covered a big part of their short positions. Low water levels in U.S. rivers, along with recent strikes, have driven up logistics costs, making transportation more expensive, hence undermining the competitiveness of the US grains and oilseeds at destination.
Ongoing geopolitical tensions, particularly the recent Iranian missile strikes on Israel and Israel’s retaliatory actions in Lebanon and Syria, and mulled measures against Iran, continues to affect global wheat supply dynamics. The Black Sea region, a critical hub for wheat exports, is particularly vulnerable to these tensions. Such instability tends to bolster wheat prices, as concerns over potential supply disruptions drive up demand.
Last but not least, Turkey’s wheat import ban, set to expire in mid-October, is another key factor influencing the global grain market. If Turkey resumes imports, it could boost international demand and significantly impact wheat prices and trade flows, adding further complexity to market dynamics. The post-war decline in Ukrainian wheat quality, caused by unfavorable weather and reduced input use, has led Turkish millers to favor Russian wheat over Ukrainian supplies in recent months. As a result, Ukrainian wheat is likely to continue expanding its presence in the EU and Egyptian markets.
Looking ahead, navigating the markets remains challenging. One thing is clear: fundamentals will be crucial. Market participants must closely monitor weather developments in key producing regions and demand dynamics, all against the backdrop of geopolitical instability.
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