Volatility offers grain sellers opportunities

Cereal growers with crops in store face a volatile six months, with physical supply risks supporting prices but ample global wheat stocks weighing on the market.

Black Sea disruption, disappointing European crops and tighter nearby availability are underpinning markets. Yet ADM Agriculture warns that investment funds have built historically large and long positions in wheat.

Any easing of geopolitical tensions could trigger selling and send prices sharply lower, said the trader in a September update. “The scale of speculative positioning makes any geopolitical breakthrough potentially very bearish,” it added.

The result could be a market characterised by short-lived selling opportunities rather than a sustained rise through autumn and winter – depending on what happens in regions such as the Black Sea.

Repeated attacks on Russian and Ukrainian port infrastructure have disrupted trade and increased the cost and risk of moving grain. Russian wheat remains competitive at about $210/t FOB, but execution has become more difficult.

European availability is also causing concern. ADM points to French heat stress and Germany’s projected 20.8m-tonne wheat crop, while logistical problems on the Danube are restricting regional trade.

Larger global supplies could limit gains. The AHDB reported global wheat stocks for 2026-27 at 276.3m tonnes, three million tonnes above previous expectations, following increased Australian and Canadian crop forecasts.

Demand test

Demand remains the weak link. ADM said Saudi Arabia had cancelled a 535,000t tender, highlighting buyer resistance to current prices, although Pakistan subsequently tendered for 750,000t.

UK demand is mixed too. AHDB said flour millers used 14% less wheat in July than a year earlier, largely because of lower bioethanol production. Brewers, maltsters and distillers used 19% less barley. That leaves growers balancing supply concerns against the possibility that buyers simply refuse higher prices.

Feed barley may have stronger underlying domestic support. ADM describes supplies as tight, while attractive prices relative to other grains should encourage its use in livestock rations.

Forage shortages could provide another floor. Growers in livestock areas are already reluctant sellers because of concerns over winter feed availability.

Malting barley is less straightforward. Poor grain retention and high nitrogen levels have reduced availability of specification crop, but maltsters remain cautious buyers. Strong feed values are also squeezing malting premiums.

For growers, the next six months favour active marketing rather than waiting the market to peak.