Bulls not fed further, causing grain prices to fall

The wheat futures market in particular has shown a brief rally in both the US and Europe. The downside of a bull market is that the so-called bulls need to be fed with news that justifies higher prices. If that is not the case, prices tend to fall back. This is clearly visible in the US, while Europe is showing a delayed reaction. There, wheat prices still managed to rise.Once again, the Euronext wheat futures market in Paris closed higher on Wednesday 20 May. Wheat for September delivery settled at €216.50 per tonne, up €1.50 compared with Tuesday’s close. The December contract moved far less, closing at €224.50.Current prices are a few euros higher than a year ago, when wheat in Paris was trading at €212. This level was never reached again for the 2025 harvest. Prices quickly fell back towards €200, only briefly returning to €209 in July. This means wheat prices are currently fluctuating around the three-year average of €213.15.Wheat tenderThe European market has also been influenced in recent days by news that the US is experiencing its poorest wheat crop conditions in three decades. In addition, a slightly weaker euro is supporting Europe’s export position and boosting export volumes. On 19 May, a tender round by the Algerian state grain agency OAIC closed for milling wheat of European or Black Sea origin. The prices paid have not yet been disclosed, but it is known that 200,000 tonnes were purchased for delivery in July and August.More countries are seeking to secure their wheat stocks for the coming season. Local sources in Egypt report that since mid-April, 3.3 million tonnes of wheat have been contracted, 600,000 tonnes more than at the same point last year. South Korea purchased 130,000 tonnes of feed wheat on the world market without issuing tenders, while US buyers purchased an undisclosed quantity of milling wheat from Poland. Traders’ estimates range from 120,000 to 350,000 tonnes. This demonstrates that European wheat is currently competitively priced compared with US wheat.Competitive exportsA strong dollar is reflected in US export figures. Last week, 223,972 tonnes of soft wheat were reported for export, significantly lower than the 511,703 tonnes recorded a week earlier and well below the 431,000 tonnes reported during the same week last year. Crop conditions across the US wheat belt have also deteriorated further. In Kansas, the proportion rated poor to very poor declined by another 7% this week.However, this news was not enough to satisfy US bulls. Their focus remains primarily on the Chinese trade deal announced by the White House on Monday. No details have been released, and it remains unclear to what extent the wheat market will benefit from the agreement. As a result, CBOT wheat fell by 6¾ cents on Wednesday to $6.60½ per bushel. Wheat prices in Kansas declined by 5 cents. Significant rainfall in the Midwest has benefited the development of corn and soybeans, both of which are currently in good condition. Consequently, prices on the Chicago exchange moved lower. Corn fell by 9½ cents and soybeans by 9¾ cents.Sharp decline in Australian wheatThis week, the European Commission unveiled its European Fertiliser Action Plan with much fanfare. The impact of higher fertiliser prices and limited availability on the global market is clearly visible in Australia. Analysts expect the country — the world’s third-largest wheat exporter — could export 10 million tonnes less wheat next season. This equates to around 5% of global wheat exports. The main reasons are sharply higher fertiliser and diesel prices combined with ongoing drought conditions, resulting in fewer hectares being planted.Australian arable farmers are currently in the middle of the sowing season. Increasingly, they are opting for barley and rapeseed instead of wheat, as these crops require fewer expensive inputs. Analysts estimate that the wheat area could decline by between 7% and as much as 20% compared with 2025. In the most pessimistic scenario, Australia’s wheat production could fall by between 16% and 40%, from 36 million tonnes to 21.3 million tonnes. Argentina and Canada, where the sowing season is also under way, are likewise expected to reduce wheat plantings.From surplus to shortage?The USDA takes a more moderate view and expects Australia to produce 30 million tonnes of wheat this year — 6 million tonnes less than in 2025. If more major wheat-producing countries decide to reduce sowings, the global market could shift from being supply-driven to demand-driven.