The global wheat market is breathing a sigh of relief as supply forecasts have been significantly upgraded, though a recent price rally, fueled by speculation, has kept traders on edge. 

A recent report from Commerzbank AG highlighted the contrasting factors currently influencing the commodity.

The German bank expects wheat prices to rise again by the end of 2026 on tight supply.

The US Department of Agriculture (USDA) delivered a major surprise in its latest World Agricultural Supply and Demand Estimates (WASDE) report, sharply revising its global wheat production forecast for the 2025/26 crop year.

USDA revises forecast

“The US Department of Agriculture (USDA) has revised its forecast for the global wheat production in the current 2025/26 crop year upward by almost 13 million to nearly 829 million tons,” noted the Commerzbank report. 

This was primarily attributed to stronger-than-expected harvests across nearly all major exporting nations.

As the increase in demand was substantially smaller than the production hike, the market has shifted into a comfortable surplus territory, now sitting at 10 million tons.

This abundance means global wheat stocks are projected to rise to 271.4 million tons by the end of the crop year, a healthy increase of 7 million tons over previous expectations.

The stock held by the main exporting countries is set to jump by almost 10% above the prior forecast, reaching 72.4 million tons.

“The supply situation is therefore much more relaxed than two months ago when the last WASDE report was published,” stated Carsten Fritsch, commodity analyst at Commerzbank. 

He added that the significant upward revision, having been foreshadowed by the International Grains Council in October, was “no great surprise.”

This pre-emption may explain why wheat prices remained stable instead of reacting negatively to the news of a surplus.

Speculative rally lifts prices to multi-month highs

Despite the clear indicators of ample supply, wheat prices experienced a notable surge this week, hitting multi-month highs on key exchanges.

On the Chicago Board of Trade (CBOT), the most actively traded futures contract climbed past 560 US cents per bushel, marking its highest level since early July. 

The European benchmark, Euronext in Paris, followed suit, reaching a three-month high of EUR 196.5 per ton.

The trigger for the CBOT price spike appears to be outside the wheat market itself.

The rally was initiated by reports of major purchases of US soybeans by China.

“The price increase on the CBOT was triggered by reports of purchases of US soybeans by China, which apparently also fueled expectations of Chinese purchases of US wheat,” Fritsch said. 

However, hard evidence of Chinese interest in US wheat remains absent. The USDA, sensing no immediate export boom, left its estimate for US wheat exports unchanged.

Carsten Fritsch warned about the potential for a reversal. 

If China does not buy US wheat, the price is likely to suffer a setback given the abundant supply. 

This short-term vulnerability is compounded by the International Grains Council’s recent decision to revise its global wheat crop forecast for 2025/26 upwards by a further 3 million tons, though this specific update did not impact end-of-year stock projections.

Commerzbank forecasts mixed price outlook

Looking ahead, Commerzbank anticipates a near-term correction for US wheat but sees a stronger recovery by the end of 2026, while the European market remains constrained.

“The wheat price on CBOT is therefore likely to decline again in the short term and trade at 540 US cents per bushel at the end of the first quarter of 2026,” the German bank forecasts.

However, a rebound to 580 US cents is expected by the end of next year. This longer-term optimism is predicated on potential supply constraints down the line, given that prices on both CBOT and Euronext had slumped to five-year lows in October.

“The low price level – wheat prices on CBOT and Euronext fell to five-year lows in October – may have led to a reduction in the area sown with winter wheat,” explained Fritsch, suggesting future harvests could be smaller.

The outlook for Euronext wheat is more subdued. It has not tracked the CBOT price as sharply because EU wheat is not expected to benefit from Chinese buying and faces fierce competition from the Black Sea region.

For the European market, Commerzbank sees only limited potential for immediate correction. 

We expect the price to trade at current levels for the time being, followed by an increase to EUR 220 per ton by the end of 2026.

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