Global wheat markets on edge as war, weather, fertilizer shocks drive new rally

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Pierre Cera-Huelva:

Hello, and welcome to the Platts Commodities Focus podcast by S&P Global Energy, where today we will cover the key topics in the global wheat market. I will be joined today by Maham Quadri, price reporter for North America, Vivien Tang, price report for APAC, and Vivian Iroanya, price reporter for Europe, Middle East, and Africa region. I am myself Pierre Cera-Huelva. I'm a global wheat analyst and the head of EU Crops Research team.

Since the war in the Middle East began late February, we have seen global wheat prices threatening with the Platts' global wheat benchmarks of milling wheat market jumping over 3%, reaching peaks last in August 2025. There has been a lot of talks, obviously, especially regarding the war in Iran and its impacts on global commodity prices, with a recent spike in fertilizers potentially affecting some crops. That has been, of course, an obvious driver for commodities, including wheat. However, for North America, weather has been the dominant topic within the past months. Maham, what is your view on that?

Maham Quadri:

Hi. In the North American market, most of the problems do seem to be with winter wheat concerns in the US, which has been driving a lot of the futures rallies we're seeing recently, which has indirectly almost impacted our Canadian wheat prices in the neighboring land over there. Domestically, there's not too much happening in terms of supply-demand issues or changes in the Canadian side, so a lot of the price changes and movements have been with what's happening in the US futures market. As of the latest Crop Progress report from the USDA, about 40% of US winter crops are in poor to very poor condition, which is up, I believe, 3% from last week. So it's definitely boosting futures levels, which has then improved cash prices across the board for a lot of the North American wheat crop.

In terms of fertilizer constraint, that has been a topic of discussion in the global wheat world or crops world, but it hasn't been a huge issue on the Canadian or US farmer side for this season, at least from what I'm hearing. They may reduce how much fertilizer they apply on top of their soil or how much nitrogen they're applying, but overall it's not a huge concern since they purchased most of their stocks and supplies in the winter before. So a lot of farmers seem to be more concerned for the next crop year. If this war continues and the supply constraints remain, they may have to change some planting decisions come 2027.

What has been a concern, though, in terms of what's happening in Canada is delayed planting. That has been a topic of discussion. Spring wheat planting in Canada typically kicks off around late April or early May, but cold and wet conditions have prompted a delayed start to planting. So there has been some discussion there, but I would say generally people are not too concerned. Farmers have the technology to seed 24/7 to make up for any of the delay, and there is progress being made at the moment. So that also isn't too much of a concern, but it has been the main topic of discussion these days, which it can be a concern since it can potentially impact yields and crop quality. That's why people have been concerned, but overall it doesn't seem to be that much of an issue at the moment.

But pricing-wise, Canadian prices have been pretty competitive overall. From the buy side, it does seem that freight rates that have been up due to the war are somewhat impacting purchase decisions. But when it comes to flat prices on the FOB Vancouver levels, they have been generally competitive in the market. But overall, that's kind of been what's happening. I think weather, again, as you said, is the main concern, and we'll see how this continues to impact the market going forward.

Pierre Cera-Huelva:

All right, thanks, Maham. That's an interesting overview. Indeed, weather has been all around the place and that remains a big concern for the Northern Hemisphere, of course, something to watch for sure, not only North America, but also down in Australia with a potential strong El Niño coming by the end of the year. How has that shaped the Australian wheat market and expectation on the new crop as well, Vivien?

Vivien Tang:

Thanks, Pierre. As mentioned earlier, the wheat market prices have certainly strengthened globally. If we zoom into Australia, actually prices have been climbing, over 10% since January this year based on our Platts FOB Australia wheat assessments. There are a few drivers behind this. Part of this is seasonal, as the export window is moving closer to the end of the marketing year in Australia, which is September. There's also influence from the higher input costs from the Middle East war.

But like you mentioned, Pierre, weather has certainly been a hot topic, especially with the strong El Niño forecast in the horizon. Now, El Niño typically brings hot and dry weather to the East Coast of Australia, where there are already concerns around Queensland as well as Northern New South Wales. In these regions, subsoil moisture levels are already below average since the winter crop planting began in April.

Now, Australia as a whole is also expected to plant less wheat this year in favor of less fertilizer-intensive crops, such as barley, or more profitable crops, including, again, barley and also canola. With all this in mind, Australia's wheat production is expected to fall in the next season. But in terms of what it really means for exports, I think trade sources aren't really expecting a huge drop next year as there will be support coming from a big carryout. In fact, the latest carryout forecast from our own analysts at CERA stands at six million metric tons. That's 50% higher than the previous season.

Now, one last thing I'll highlight here would be the potential negative impacts of lower fertilizer application on the yields and the quality of the next crop, like what Maham mentioned earlier. Australia itself is quite dependent on nitrogen-based fertilizers that come from the Middle East. While it is actively seeking alternative suppliers or boosting domestic production, supply as well as pricing concerns are not fully resolved. So if growers actually choose to fertilize less, either to save cost or simply because they can't find a supply, it can decrease yields but, more importantly, protein levels in the new crop wheat. This will be an issue for buyers who rely on high-protein Australian milling wheat. Now, on the flip side, this does mean Australia could be competitive in the low protein and feed wheat space. But I'd say a lot of that will still depend on how this fertilizer situation plays out closer to the next key application window between June and July.

Pierre Cera-Huelva:

All right, a lot of things as well in Australia. Thanks, Vivien. We also heard recently more offers coming from the Black Sea region as they approach the winter wheat harvest. These orders are coming in the Asian market for new crop competing with Australian origin. Vivian, what is the supply outlook in the Black Sea for the next season, do you have an idea?

Vivian Iroanya:

Yes. Traders in the Black Sea have shifted their focus to the new marketing year, which starts in two months' time in July. I'd say one thing to notice is the tighter spread between the old crop and the new crop of just a few dollars, but also the lack of sentiment that the Black Sea market is going to fall significantly in the near term. This is, for example, such a huge contract compared to last year when the new crop was at a $10, even $15 discount due to a record crop at the time.

For the upcoming season, this tight spread is due to several factors, one of them being a much lower production, for example, in Russia with our CERA analysts forecasting a 3.1 million metric ton decline year-on-year. But also on top of this, we have the ruble, which has reached 2023 low levels of 73 ruble to a dollar, which overall is adding to the tight squeeze in exporter margins.

Alongside this, there is Ukraine. Ukraine is likely to have a much smaller production as well, just one million metric ton less. But the main focus here is actually the record carryout stocks projected at 4.7 million metric ton, which is likely to translate to higher exports. Let's not forget that Ukraine is in the middle of its own war with Russia, which has worsened its logistical constraints. On top of that, we also mentioned the fertilizer and diesel spikes have worsened overall the internal markets. So this is definitely something to watch for the next marketing seasons.

Pierre Cera-Huelva:

All right, thanks a lot for that. It seems we have talked quite a bit about crop production estimates in major exporting countries, mostly on the supply front and the impact on prices, of course. But what about the actual import? Are there any important factors to highlight in our key demand region globally? I think APAC could be an interesting one to start, Vivien, if you have anything on that.

Vivien Tang:

Yeah, I'm happy to share some insights from what we are observing in Asia, which is a pretty big demand region globally. The buying pace in Asia, I'd say especially Southeast Asia, has remained pretty hand-to-mouth in recent weeks as grain prices have actually strengthened quite a bit after prolonged periods of depressed levels. It did jump overnight as well after the recent WASDE report release. Freight rates are also still elevated against the backdrop of obviously the Middle East war. On top of that, buyers have also been cautious about downstream demand growth this year. That is partially driven by economic uncertainties and rising input costs from energy and also plastic packaging materials, which are all related to the crude oil markets. So with all this in mind, it's quite likely that this hand-to-mouth buying pace that we are observing is here to stay, at least in the near term.

Moving forward, another thing to look out for is actually Chinese demand, which had been a significant [inaudible 00:10:12] factor in the global wheat markets until we saw a huge drop in imports last year. While there are expectations that China will be importing more wheat than they did in 2025, which came to about three million metric tons, unless there is a significant crop failure for their upcoming domestic harvest, which kicks off around May to June, most of the trade really doesn't expect China's imports to hit the 10 million metric ton levels that we saw prior to 2025.

Pierre Cera-Huelva:

Interesting. China is obviously a big one, a big market swing. They have been quite quiet recently buying more barley than wheat, but this is an interesting thing. Thanks for that, Vivien. There is also a lot of things to say in the Middle East-North African region. They are harvesting or in the middle of the harvests for some countries. It seems to be excellent crop outlook over there, Turkey, Egypt, Morocco, etc., main markets for both European and legacy wheat. Do you have any insight on that, Vivian?

Vivian Iroanya:

For sure, Pierre. Currently, there is weak demand in several importing countries. Around this time, these countries are harvesting their own wheat. As you mentioned, Egypt, Morocco, Turkey, Algeria, they're all forecasted to produce much more than last season. Platts is due to launch a CIF East Med basis Egypt's 12.5 price assessments engine to dive a little bit more on the price trend in this region, especially at a time of geopolitical wars.

If we take Egypt, for example, starting from mid-last month, buyers here have been extremely quiet, over-supplied with wheat. The state is even ramping up its local wheat purchases, buying at a 17% faster pace than last year. The biggest increase in production is looking to be from Turkey and Morocco at four million metric ton more. For state boards, Algeria, Saudi Arabia, and Jordan, they've all been stockpiling new crop wheat. On a slight positive note, it is the fact that feed prices to the MENA region have definitely returned to pre-Iran war levels due to this overall weak demand. So it will be interesting to see how the prices will move in the light of unexpected lower demand in the near term.

Pierre Cera-Huelva:

Well, thank you, Vivian, for this. I think, yes, the import demand in the MENA region, Middle East-North Africa, is something important, something to keep in mind. Our side in the research team, we do forecast and we have pegged, for example, the Morocco wheat production between seven and eight million tons, which is basically huge. We don't plan Morocco to import a lot of wheat in the first half of the season. Same for Egypt, very good crop outlook. Same for Turkey, probably record crop between 20 to 23 million tons, and so probably very low import demand. That is something to keep an eye on. All across, I think, the Middle East-North African region, the outlook looks very good. So that has been also something noted in the May WASDE reports as they acknowledge the very good crop outlook and the lower import demand overall. I think this is obviously a focus in the market.

The APAC region import demand as well is something we continue to keep, let's say, a stable outlook for the APAC region. China being quite apart, so mostly low growth. They don't rely on their crop, so mostly low growth and slow GDP that could influence a bit the import demand and put some sluggish import demand outlook there.

I think now the focus of the market is very much in the production outlook for the main exporters. I think what was very important to highlight in the May WASDE was the US wheat production. It came out in an historical low. The low number, as you wish, was HRW wheat production came out close to 500 million bushels, which was far, far below analysts' estimates. That surprised the market, and that's why futures reacted that much as it climbed around 40 cents right after its publication. So that is, obviously, something to keep an eye on.

The harvest is barely beginning in the US, and there could be some more damage done to the crop. On the other side, we do have very good production outlook in the EU, more than 136 million tons for both soft and durum wheat, which is very good. Very good outlook mostly in the western parts. The eastern part a bit dry, but I think nothing to really worry about at this point. And Russia, a very good production outlook for winter wheat. Spring wheat a bit delayed in planting, so that is something to keep an eye on. We are not very worried at this point, but that could be a problem going forward. But, again, winter wheat outlook, very, very good. So that could offset, I think, the losses we could see, if we see losses in spring wheat areas.

The last thing in Australia, we did cut, that's true. Vivien, we did see very last switch in plantings. Farmers did reduce the acreage in wheat to plant more barley and much more canola, but that's our assumption at least. That did cut our production outlook for next year, which has been put at 28 million tons, which is probably on the low sides of all the analysts' estimates. It's mostly due to reduction in the area. We didn't change our yield assumption. Again, that is along with, let's say, the negative outlook in terms of production estimates for Australia. We expect a stronger linear to come, and most of Australian cropping areas are dry. Soil moisture is quite low everywhere. That does not put very good condition for early crop developments. Again, combined with a linear later in the year, that could be, again, more negative news for the Australian wheat production. But, again, a lot of time ahead of the harvest for the Australian productions that could also improve the crop, actually. So let's wait and see.

Again, thank you all very much for all the useful information, Maham, Vivien, and Vivian, and for joining me in this conversation. Of course, thank you for listening. This episode was produced by Chandreyee Mukherjee in Gurugram. Thank you all very much, and I wish you a very pleasant week. We'll speak later.