Where in the World is Wheat going?

Wheat prices are experiencing a dramatic surge, with the wheat futures contract skyrocketing from $5.53 per bushel on April 18, 2024, to $6.87 per bushel by May 13 - an astounding 24% rise in a few weeks. This surge marks the highest level since August 2023 and signals a major shift in the global commodity market. No longer confined to market speculators, this spike is reverberating through the supply chains and directly impacting procurement leaders. So what in the world is going on with wheat? 

In one word: climate.  The recent price hike is being driven by erratic weather patterns, underscoring the complex new environment that traders and procurement managers need to manage as climate change accelerates. 

In Russia especially, the situation has been particularly concerning. From mid-March to mid-April, moisture levels in southern Russia were only 60% to 80% of normal, coupled with temperatures 2°C to 4°C above average. This was followed by severe frosts in early May, with temperatures plummeting to -4.6°C, damaging the wheat crops. These conditions threaten to significantly reduce the yield.

In the United States, the outlook is mixed, adding to the complexity of the market. The Southern Plains have seen some improvement in moisture levels, alleviating drought concerns. However, recent dry and windy conditions have raised alarms about the 2024 wheat crop prospects. Helios’ AI platform has seen Kansas and Minneapolis, the largest HRW wheat producers, reduce their overall climate risk levels from March highs - but remain elevated.   

So where is the market going from here? U.S. Wheat Associates Market Analyst Tyllor Ledford told us, “Soon, the first harvests of the 2024/25 crop year will provide more concrete information on supply availability and quality. Until then, weather conditions will play a crucial role in global grain markets as winter wheat enters late growth stages and spring wheat planting progresses.”

From a climate perspective, Helios’ platform predicts that over the next 16 days global climate risk will continue to decrease substantially to a minimum of 7.7%, driven primarily by reduced risk in US wheat (Chicago and Minneapolis) and France, before increasing back up to 12% (albeit half of the highest climate risk we’ve experienced this growing season).  Given this favorable reduction in climate risk, we would expect to see a pullback in US wheat prices in the medium term.