Wheat

Wheat updates

Wheat markets strengthen amid anticipated small global crop.

Global wheat supplies are tightening, supporting the recent rally in wheat markets. This shift reflects declining global production forecasts tied to anticipated El Niño conditions and elevated fertilizer costs. U.S. total wheat supplies are projected to fall to their lowest level in over a century.

An expected drop in U.S. wheat production is driven by low prices, reduced acreage and poor growing conditions. Winter wheat production is expected to fall to its lowest level since 1956, with declines across all classes as widespread drought pressures yield. Similarly, reduced acreage for durum and spring wheat is contributing to total U.S. production forecasts that are the smallest since 1972. Drought across the Great Plains has further limited production potential, with an estimated 8 million acres already abandoned.

Wheat prices strengthened in May as persistent dryness and deteriorating crop conditions in the Central and Southern Plains re-entered market focus. As of June 1, 55% of wheat in Kansas was rated very poor to poor, along with 80% in Nebraska and 64% in Texas, reinforcing concerns around production losses and further abandoned acreage.

In contrast, wheat conditions in the Pacific Northwest remain highly favorable. Winter wheat across much of the region is rated good to excellent, supported by generally strong growing conditions. Despite isolated reports of stripe rust and minor freeze damage in mid-May, recent warmer temperatures have supported recovery and maintained generally strong crop conditions with most areas a few weeks ahead of normal development. Spring wheat development in the Pacific Northwest is also progressing at or ahead of normal and benefited from timely rain in late May.

Profitability remains the central challenge for wheat producers. Despite improved prices, margins remain under significant pressure. Nationally, USDA increased the projected season-average farm price to $6.50 per bushel, up $1.50 from the previous year. At Portland, FOB prices increased across most wheat classes, with HRW rising modestly to $7.72 per bushel and HRS holding near $8.10. However, these gains have not been sufficient to offset elevated production costs. In Montana, HRW prices averaged approximately $5.61 per bushel on May 28, which is over $1.39 higher than a year ago, however this remains below estimated breakeven levels of more than $6.00 per bushel for winter wheat. A similar dynamic is unfolding across the Pacific Northwest, where year-over-year price improvements have been meaningful but remain insufficient to offset rising input costs.

Rising input costs continue to outpace price gains and increase the cost of production. A wheat producer in central Montana is now paying $1.946 more per gallon of diesel on June 1 than they did a year ago. Elevated cost structures are limiting financial recovery, leaving many producers in a defensive position heading into the remainder of the growing season.

Profitability

Persistent margin pressure continues to weigh on wheat producers, as low prices and elevated input costs limit profitability, though tighter supplies and drought-driven yield risks may provide some price support in the months ahead.