Wheat Futures Return to 2-Month Low

Wheat futures fell to around $5.80 per bushel in mid-June, returning to their lowest level since April 10, as the potential reopening of the Strait of Hormuz could improve the availability of key agricultural inputs. The tentative US–Iran peace agreement included the reopening of the strategic waterway, with Iranian Deputy Foreign Minister Kazem Gharibabadi confirming the deal and officials from both sides expected to meet in Switzerland to formalise it. Greater availability of key agricultural inputs in wheat production, such as fertilisers and fuels, allows farmers to produce more efficiently, increasing supply and prompting downward pressure on prices. Meanwhile, the USDA recently cut its winter wheat outlook by 2% from a month earlier, citing drought conditions across the Plains that pushed hard red winter wheat output to its lowest level since 1957. Crop conditions have also weakened further, with just 25% rated good-to-excellent, the lowest level for this time of year on record.

Wheat futures rose above $5.9 per bushel in mid-June, climbing off a recent two-month low, as US supply concerns intensified following a fresh downgrade to the winter wheat crop outlook. The USDA cut its US winter wheat outlook by 2% from a month earlier as a harsh Plains drought pushed hard red winter wheat production to its lowest level since 1957, while crop conditions deteriorated further with just 25% rated good-to-excellent, the weakest for this time of year on record. The decline in US output has tightened supply expectations, even as harvest activity gets underway across key growing states including Kansas, Oklahoma and Texas. El Niño weather risks continued to underpin prices, raising the threat of droughts, floods and temperature extremes across major global growing regions. The drop in output has also added pressure on US farmers already facing higher fuel and fertilizer costs, driven by disruptions in the Strait of Hormuz and trade tensions stemming from US tariff measures.

Wheat futures rose above $5.90 per bushel in early June, staying away from a near two-month low touched on June 5, as the emergence of El Niño heightened concerns over global crop risks. The climate phenomenon, which has taken shape across the equatorial Pacific and expected to intensify in the months ahead, is likely to unleash droughts, floods, and temperature extremes that could disrupt production of key commodities, including wheat. Its impacts are also projected to intensify globally, including a wetter-than-usual winter in the southern US, drought and wildfire risks in Australia, and potential disruptions to the Atlantic hurricane season. Additional support came from short-covering and bargain hunting ahead of the USDA’s closely watched June supply-and-demand report due on Thursday, as investors monitored signs of renewed Chinese purchases of US agricultural products following Beijing’s pledge last month to buy $17 billion worth of US farm goods.