Drought in Russia: Grain region particularly affected
In Russia, the main region for grain cultivation has been experiencing dry conditions for weeks. This is likely to result in lower yields and poorer quality than previously expected.
The USDA's June forecast slightly raises the global wheat harvest for 2025/26 to a record level of 808.6 million tons. At the same time, consumption is significantly revised upwards.
In its June estimate, the US Department of Agriculture (USDA) made minor changes to the outlook for the global wheat market in 2025/26. Production was adjusted slightly upwards.
The USDA now expects a record harvest of 808.6 million tons (+0.1 million tons). This exceptional result is mainly due to a higher harvest in the EU (136.6 million tons) resulting from better prospects for the Spanish wheat harvest and a new record in India (117.5 million tons). The global increase is primarily attributed to higher yields, as the global area under cultivation is estimated to decrease by nearly 0.5 million hectares to around 222 million hectares.
Simultaneously, the USDA has raised the global wheat consumption by 1.7 million tons to 806.4 million tons. This is mainly due to stronger food and feed demand in Nigeria, Sudan, and India. This keeps the market tense, as global ending stocks are reduced by 3 million tons to 262.8 million tons compared to the corn estimate, reaching the lowest level since 2016/17.
The slight deficit between production and consumption is reflected mainly in the expected declining stocks in Russia, Turkey, and the USA. The significant reduction in stocks in Russia, according to the USDA, explains the decline in ending stocks.
There are also slight adjustments for international trade. Accordingly, exports are now estimated at 214.3 million tons (+1.3 million tons). Besides the USA (22.5 million tons), the EU (34.5 million tons) is expected to benefit from the increasing harvest quantities, while Russia maintains its export dominance.
How did the markets react to this?
The Chicago market reacted cautiously to the USDA report. CBOT wheat lost moderately after the report was released, as the almost unchanged US harvest estimates were already factored in. A similar trend was seen for wheat prices in Paris.
Wheat futures on the Euronext market slightly declined. Here, a sudden increase in the Euro further dampened export prospects. The positive harvest outlook in Spain also heightened expectations of ample supply in the northern hemisphere.
The USDA's outlook continues to contrast with the estimates of the International Grains Council (IGC). The IGC maintains its forecast at 806 million tons of production and anticipates a supply gap of around 7 million tons due to a global demand increase to 813 million tons, along with shrinking stocks.