Is 2026 the year to put the rally hats on in winter wheat country — and keep them on, at least for a little while?
After a dismal 2025, wheat markets showed some signs of upside life, or at least bottoming out, over the past month. Wheat ranked among the poorest performers among major commodities in 2025, with the most-active soft red winter (SRW) wheat futures contract dropping over 8% for the year and hitting a six-year low in October.
But the past month or so saw some buoyancy return in futures prices, along with a few other interesting developments that suggested the market may be shaking off some oddities or outlier elements from the past year.
What’s going on? We could sum it up as the “DADS” effect — drought, acreage, demand and spreads.
Drought
Despite widespread Plains rains last fall, not every area benefited equally. In Oklahoma, drought conditions expanded from December through early January, with most of the state considered anywhere from “abnormally dry” to in “extreme drought,” government weather maps showed. Initial crop ratings from Kansas and other states in January showed deterioration from November readings.
Persisting concerns over drought or other weather problems could give wheat prices a lift over the winter.
“The markets have zero weather premium baked in, so we could have a little room to push values higher, short-term, until concerns ease,” StoneX analyst Mike O’Dea wrote in a January report.
Citing conversations with customers, “the wheat still looks in good shape, but the plants are growing too much when the crop would normally be in dormancy, (which) makes them susceptible to any cold snap seen later,” O’Dea wrote.
Acreage
With wheat prices still relatively weak compared to corn and soybeans, many U.S. producers continue to favor the latter two crops for another year. In January, USDA estimated 2025 U.S. winter wheat plantings at 32.99 million acres, down 0.5% from 2024 and the lowest since 2020.
Ample Plains precipitation late last year “allowed more continuous cropping behind corn, soybean and milo harvests,” said Tanner Ehmke, grain and oilseed economist at CoBank. However, “low wheat prices relative to corn and soybeans, I think, are still going to result in a net loss of wheat acres.”
Demand
While abundant global wheat supplies have gotten a lot of press, demand for the U.S. grain has held in there. For the 2025-26 marketing year through early January, U.S. wheat export sales commitments were up 18% from the same period in 2024-25. USDA estimated overall demand for U.S. wheat at 2.05 billion bushels, a five-year high.
Spreads
July 2026 futures for both SRW and hard red winter (HRW) varieties expanded premiums over March contracts by several cents from late-2025 lows. The July-March HRW spread briefly topped 27 cents to hit a two-month high at the end of 2025.
Premium expansion may signal increasing drought concern or generally friendlier, longer-term sentiment. It’s also worth following these spreads to help inform potential pricing opportunities for the new harvest.
Additionally, the HRW market’s relative strength has helped it restore its historical protein premium to SRW. In January, May HRW futures jumped to 15 cents over May SRW. That marked a sharp reversal from most of 2025, when HRW traded at a discount to SRW due in part to excess lower-protein HRW supplies.