The recent wheat rally due to a smaller U.S. crop may be over for now with a lingering price sell off suppressing wheat futures prices for a bit longer. However, looking toward the latter part of 2026 and into 2027, global wheat production may be at risk due to El Nino, which could prompt a rally in 2027.
What’s happened
The month of May saw a tremendous price rally for wheat futures. Due to the reality of a poor U.S. crop, the July 2026 Chicago wheat futures rallied as high as $6.88¼ and the July 2026 Kansas City wheat futures contract rallied as high as $7.50 during May. Both contracts have since lost nearly $1 of that price rally as traders now feel that in spite of a smaller U.S. crop, global wheat supplies remain sufficient. This perception of sufficient global wheat supplies may hold true for a few more months.
The June USDA WASDE report acknowledged the smaller U.S. wheat crop. However, traders felt the news was likely already priced into the market. Looking at the global wheat crops the report said:
“All categories of the 2026-27 global wheat balance sheet are raised this month. Supplies are projected up 1.7 million tons to 1,100 million, mainly on increased production for Russia, Turkey, and Ukraine, which is partly offset by lower production in Australia and Pakistan. Projected 2026-27 global ending stocks are raised 0.4 million tons to 275.4 million metric tons, mostly on increases for Egypt and Turkey that are partially offset by lower stocks in Ukraine, Australia, Russia and the United States.”
From a marketing perspective
With perception of ample global wheat supplies, what would potentially make wheat prices rally again in future months? Weather.
I am not a weather guru by any means, but talk about El Nino has me concerned. According to a recent article on npr.org, meteorologist Nat Johnson of the National Oceanic and Atmospheric Administration says: "If we have a big El Nino on top of the long-term warming trend, that just really enhances the probability that we'll see a new record global mean temperature." NPR report that leaders from Europe to India and Australia see potential for harmful effects, including heat waves and abnormally dry conditions.
What specifically caught my eye was the portion regarding heat waves and dry conditions for Europe, India and Australia, as those countries are major global wheat producers. Looking at the chart below, you can see easily how the top three global producers of wheat are the European Union, India and China. El Nino might adversely affect wheat production in two of the top three wheat producing regions of the world.
The top three wheat producers in the world consume nearly all of the wheat they grow, with China consuming more wheat than what they produce, relying on imports. What if India has a poor crop and then has to rely on imports as well? That would really change the global dynamics of supply and demand.
Prepare yourself
For now, with the perception of ample global supplies, the funds may continue to press the “sell button” with positions, which could add to a continued sideways to lower price pattern in the short term.
It will also take some time to see how the El Nino weather pattern plays out in the coming months. And while past performance is not indicative of future results, Chicago wheat seasonals suggest price may grind lower until the late August or September time frame.
Monitor global weather for the major global wheat producing countries in the weeks and months ahead. Depending on what Mother Nature has up her sleeve, wheat futures prices could see a tremendous price increase and bull market heading into 2027.
Reach Naomi at naomi@totalfarmmarketing.com or find her on X at @naomiblohm.
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