The wheat market is facing headwinds. The International Grain Council (IGC) has raised its wheat harvest forecast, the US weather is favouring wheat growers, and the supply of wheat from the Black Sea region is holding back the market. Nevertheless, futures markets closed in the green. Market players are preparing for the US biofuel blending mandate.
The September wheat contract on the Matif closed yesterday €3,25 higher at €197,25 per tonne. Wheat also saw a slight gain on the CBoT. In Chicago, wheat closed one and a half cents higher at $5.07 per bushel. Corn rose more strongly, rising 7 cents to $3.87 per bushel. Soybeans also closed in the green. The September contract closed 19 cents higher at $10.34 per bushel.
The International Grains Council (IGC) has raised its wheat yield forecast for the 2025/26 season by 3 million tons to 811 million tons. This is well above the USDA's forecast of 807 million tons. Rain expected in the southern US prairies is also putting downward pressure on prices. The first wheat for the 2026 harvest will soon be sown there. Sufficient moisture early in the season naturally helps the crop survive the winter.
Competitive Black Sea prices
Another recurring factor is the supply of wheat from the Black Sea region. Although the supply is not yet sufficient, the prices being quoted by exporters are competitive. According to the latest data from the Ukrainian Ministry of Economy, Ukraine has harvested 27,3 million tons of grains and legumes. This is 5% less than the 28,6 million tons harvested this time a year earlier. By far the largest portion of the Ukrainian harvest is wheat, at 21 million tons. Incidentally, 21,7 million tons were harvested during the same period last season. Five million tons of barley were harvested, compared to 5 million tons the previous season. According to the Ministry, a total of 5,5 million hectares have been threshed, which represents approximately 6,7% of the area.
The fact that wheat has risen slightly on the futures markets is primarily due to developments in corn and soybeans. The prices of these commodities have risen, and wheat has followed in their wake. The rise in corn and soybeans is largely due to the US mandate for blending biofuels into gasoline and diesel. The US Environmental Protection Agency (EPA) must decide on approximately 190 exemptions that—mostly smaller—oil refineries have applied for from this blending requirement.
Deciding on blending
Just like in Europe, American oil companies are required to blend a portion of biofuel, such as ethanol or soybean oil, into their fuel. Smaller refineries can apply for an exemption if they can demonstrate that this requirement will cause them financial difficulties. Due to political indecisiveness and an energy crisis following the Russian invasion of Ukraine, some applications date back to 2016. Both the oil industry and the agricultural sector are advocating for a decision to finally be made.
Agricultural and biofuel groups have urged the EPA to limit the number of exemptions and require other refineries to compensate for exempted volumes. The oil industry strongly opposes redistribution, arguing it creates an uneven playing field and creates additional regulatory burden. Earlier this year, the EPA indicated that larger refineries would be required to compensate for exempted volumes in the future, but was unclear about how to address the dozens of outstanding requests.