It's easy to miss the recent shift in the global wheat market narrative.

The world's exportable wheat supply is not expected to drop to a multi-year low in 2024-25, as was predicted by recent trends.

The relief may only be temporary. The upcoming harvests of wheat in Russia and Ukraine, who account for 30% of global exports, are expected to be modest. This could mean the story about a thinning wheat supply will reappear for 2025-2026.

Change in Pace

The U.S. Department of Agriculture projected that global stocks of wheat to use (SU) in 2024-25 would be at their lowest level since 17 years, with 14.56%.

This month's update puts that figure at 15,89%, which is the second highest in the last six-year period. This is largely due to the sharp drop in Chinese wheat import estimates during the past three months.

The 2024-25 target still falls below the long-term average.

USDA has predicted that world wheat SU will reach decade lows every year for the past three years, and then slowly creep up as marketing years progress.

The 2020-21 SU is currently at 14.74 %, which is the lowest level since 2007-08. This is the benchmark that you should keep in mind as you look ahead to 2025-2026.

RUSSIA AND UKRAINE

Last week, the USDA's Kyiv attache estimated the Ukrainian wheat harvest for 2025-2026 at 17,9 million metric tonnes. This is a 13-year-low and a 23% drop on last year. The soils were very dry during planting and profitability was poor, resulting in a reduction of sown areas.

Russian agencies predict that the harvest in 2025-26 will range between 79.7 and 82.5 millions tons. The latter is the same as a year earlier.

The attache believes that Ukraine's wheat exports in 2025-26 will be less than half of the previous record.

Since the Russian invasion of Ukraine in 2022, Black Sea trade has been threatened. This has hampered mostly Ukrainian exports.

Although Russian exports of food and fertilizer are not directly affected by Western sanctions, Moscow insists that measures against Russian companies responsible for these shipments must be lifted if the country is to participate in a maritime deal.

The data does not show that wheat exports are being hindered as much as the Kremlin claims. The bumper crops have allowed Russian wheat exporters the highest-ever volume in 2022-23, 2023-24.

Moscow's arguments are further undermined by the fact that the exports of crops were at record levels in those years.

The smaller Russian wheat crop of last year will bring 2024-25 exports down to their lowest level in three years, but the proportion of the crop that is exported will still be high because Russian grain was priced below its competition.

On Tuesday, promising talks about a possible ceasefire between Russia & Ukraine were underway. However, any resolution of the conflict would have little impact on wheat production scenarios for 2025-26 since most of this crop has been planted.

Don't forget

The U.S. plantings of wheat in 2025-2026 will fall by 1.6% compared to the previous year. This includes a 55-year-low area for the spring high-protein variety. As of Sunday, U.S. Winter Wheat was slightly worse than it was a year earlier.

Argentina's wheat harvest in 2025-26 could be a record if the temporary export tax reduction is extended past June. This would make planting grain more attractive to farmers.

In Canada, farmers plan to increase the area of wheat planted in 2025-26 by 8% compared to last year. Dryness in Australia may reduce the crop in some areas by 16% compared to last year. Soft wheat yields in the European Union are expected to increase 8% compared to last year.

Together, Argentina and Australia, Canada, Europe, and the United States, account for 54% of the global wheat exports. This is why the USDA will pay attention to them on 12 May when they release their initial outlooks for the years 2025-2026. Karen Braun is the market analyst at. The views expressed are Karen Braun's.

(source: Reuters)