By A tighter wheat market over the next season could aid wheat prices in the coming year, according to experts.
The global wheat market is set to tighten over the 2024-25 season, with ending stocks declining 3.3% on a year-on-year basis to 258 million tons.
If this is realised, it would be the lowest ending stock figure since the 2015-16 season, according to ING Group’s estimates.
Though the US market will witness an increase in ending stocks of wheat, ING still expects global stockpiles to edge lower due to declines in other parts.
Declining output
European wheat prices have risen due to a fall in production to its lowest levels since the 2007-08 season.
Output is estimated to have fallen by 9% on a year-on-year basis to less than 125 million tons in Europe.
Warren Patterson, head of commodities strategy at ING, said in a report:
Weather conditions in winter 2023 weighed on EU plantings and yields have also not performed, which has hit output heavily.
This has been largely driven by the EU’s largest producer, France.
Meanwhile, production in Russia has also declined.
Production of wheat is estimated to have fallen 11% compared with the previous year to just 81.5 million tons in the current season.
“A combination of frost and dry weather has led to a number of revisions to this season’s Russian crop,” Patterson said.
Declines in Russia, Europe partly offset by increases elsewhere
Lower production in Russia and the European Union has been partly offset by increases in the US and Australia.
US wheat production is estimated to have risen by 9% on a year-on-year basis in the current season on the back of stronger yields.
Additionally, Australia’s production also surged 23% compared with the last season to 32 million tons.
After last year’s poor production figures, better yields have helped boost Australian wheat output.
“Aggregate global wheat production in 2024/25 will trend higher and despite marginal consumption growth, stocks are still forecast to edge lower,” Patterson said.
Market may yet tighten in 2025-26
Despite marginal growth in consumption and overall rise in production, ending stocks are expected to fall sharply.
“Winter wheat plantings in the northern hemisphere for next season are now complete, and we’re left with something of a mixed bag,” Patterson added.
For the next season, the US wheat market will witness little change.
However, yields may fall back towards a five-year average, which could lead to a drop in production by around 10%.
This, along with marginal change in both domestic and export demand would mean that the US ending stocks would edge lower in 2025-26, according to experts.
On the other hand, both the EU and Ukraine are likely to see a recovery in output from the current season.
Russia paints a different picture
Dry weather through the autumn delayed plantings and as a result, the area has also shrunk.
This could see Russia’s wheat crop fall around 1.5% year-on-year basis to almost 80 million tons.
Concerns over a smaller crop have led the Russian government to cut the export quota to 11 million tons during February 15 to June 30 of next year. This is down from 29 million tons in the same period this year.
SovEcon projects Russian wheat exports in December 2024 to range between 3.3 and 3.5 million tons, down from 4.1 million tons in November.
The month-over-month drop of 17% in Russian wheat exports is attributed to reduced profitability, SovEcon said.
“In recent weeks, the profitability of wheat for exporters has decreased due to an increase in export taxes,” Andrey Sizov, managing director at SovEcon, said in a note.
Currently, the margin for exporters is negative, compared to about $10 a month ago. The export tax now stands at 4,872 rubles per metric ton ($47/mt), up from 2,569.2 rubles per metric ton ($26/mt) a month earlier.
SovEcon forecasts Russian wheat exports for the 2024-25 season at 44.1 million tons, while the US Department of Agriculture projects 48.0 million tons.
Sizov added:
We believe the market may be overestimating Russia’s export volume for the current season and expect significant slowdowns in Russian exports to bolster global prices.
According to ING, global ending stocks of wheat is projected to fall to its lowest in a decade next season.
“As a result, we expect CBOT wheat prices to trend higher through 2025 and currently forecast prices to average $6/bu (bushels) over the year. However, similar to other grains, trade tensions are a downside risk,” Patterson concluded.
At the time of writing, the US wheat futures were trading around 5.6 cents per pound on CBOT.
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