2025-26 Wheat & Barley Strategy Update
Program currently underway, see updates below.
Summary
- Wheat Market Overview Global stocks remain heavy with ample supplies, keeping prices under pressure. Local prices are further pressured by a strengthening Australian dollar and a weakening US dollar.
- Wheat Geopolitics & Futures Managed funds are “short” on CBOT and Matif wheat futures, which could lead to a short-covering rally if a production issue arises in the Northern Hemisphere. China has authorised its first cargo of Argentine wheat and approved imports of grain products from Russia.
- Wheat Strategy Prices are expected to remain under pressure until a Northern Hemisphere production issue develops. A prudent strategy may be to “Reposition out of Wheat and into Barley” (swap or sell wheat and buy barley). Growers can use Matif Wheat Futures to capture “carry” and protect against falling global prices.
- Barley Market Overview Unlike wheat, global barley prices remain supported by strong demand, active export programs and relatively tight supplies. Although the Australian dollar is working against the grower.
- Barley Demand Chinese demand remains consistent (forecasted 11-12 mmt imports for 2025-26). Good feedlot margins and dry conditions in Australia also entice growers to hold barley, further supporting local prices.
- Barley Strategy Prices are well supported into the 2026-27 season. Growers are advised to hold barley in locations with lower carry costs and exposure to export margins.
- Currency Hedging Hedging the Australian dollar against the US dollar is recommended during times of local currency weakness.
Strategy Summary
Wheat
With harvest pretty well wrapped in Australia and Argentina, global stocks remain heavy. The global market sits comfortably for the time being with ample supplies and no new crop production issues on the horizon. Interestingly, despite the burdensome level of stock, global markets have recently reacted to forecasts of potential winterkill events across parts of the US, Black Sea and Europe. These forecasts failed to eventuate with any significance and price gains were quickly given up by the market. The strengthening Australian dollar largely negated local prices reflecting any of this volatility.
Concerns around the US economy, the US Federal Reserve being under pressure to lower interest rates and the Australian Federal Reserve increasing interest rates, is culminating in the US dollar weakening and the Australian dollar strengthening resulting in lower local values for grain.
Argentine wheat continues to offer cheap wheat to Asian buyers. COFCO International (Chinese state owned) shipped its first cargo of 65,000 mt of Argentine wheat – the first since market access was authorised by China in January 2024. Argentinian wheat export pace is expected to taper off in March as Corn and Soybean export activity ramps up.
In an effort to diversify its source of agricultural suppliers, China has approved imports of wheat bran and other grain products from Russia, as Russia attempts to increase its agricultural exports to China.
Futures Markets Short
Managed funds remain short (sold) across both CBOT and Matif wheat futures markets, potentially setting the scene for a short covering event should a production issue eventuate.
Strategy Implications
Wheat
2025-26 Crop
Global and local prices are expected to remain under pressure until a production issue develops in the northern hemisphere winter crop. Any further strengthening of the Australian dollar will maintain pressure on local prices and keep export margins tight.
Limited grower selling to date is keeping market liquidity tight for the time being however increased grower selling is likely to pressure prices if no production issue/s develop in the northern hemisphere. A prudent strategy may be to “Reposition out of Wheat and into Barley” (swap or sell wheat and buy barley). Growers can use Matif Wheat Futures to capture “carry” and protect against falling global prices.
2026-27 Crop
As mentioned, global markets seem surprisingly sensitive to any potential production/weather issues in the northern hemisphere. Opportunities to hedge (Put Options or Swaps) may present should this drive any short covering but be wary of your production risk considering the dry subsoil moisture profile currently across the state.
Hedging of the Australian dollar may be prudent during times of weakness in the local currency.
Strategy Implications
Barley
Unlike wheat, despite comfortable global supplies, strong demand is driving very active export programs and supporting global prices. In Australia, better export margins are lifting prices as exporters favour barley exports over wheat. A lack of grower selling is also supporting barley prices as dry conditions and good feedlot margins entice growers to keep their barley as a drought hedge.
Chinese barley demand remains consistent with Lachstock Consulting forecasting China barley imports for 2025-26 at 11-12 mmt despite shifts in corn and wheat values. According to Lachstock Consulting, underlying demand from China seems well supported.
Good export margins relative to other commodities is driving strong SA barley export pace.
2025-26 Crop
Global and local prices are well supported despite the strengthening Australian dollar. Any prolonged dry periods in Australia are likely to further drive feed values however any widespread rainfall (early break) may dampen price strength.
2026-27 Crop
A good export demand profile and relatively tight balance sheet should keep barley values well priced into the 2026-27 season. Hedging of the Australian dollar may be prudent during times of weakness in the local currency.
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