Australian wheat farming in trouble due to cost explosion

The May wheat contract on the Matif closed €1 lower yesterday at €202,25 per ton. On the CBoT, wheat fell 7 cents to $5.87 per bushel. Corn closed 6 cents lower, coming in at $4.59 per bushel. Soybeans, in contrast to cereals, closed slightly in the green on the Chicago exchange, up 2 cents to $11.63 per bushel.

Growing conditions for winter cereals in the Benelux have been favorable this past winter, writes the JRC, the scientific office of the European Commission, in the new edition of the Mars Bulletin. Two cold spells, the first in December and the second in mid-February, with temperatures dropping to 10 degrees below zero, caused no damage to the winter wheat. The predominantly dry and mild weather forecast for our region in the coming period is favorable for spring fieldwork, according to the JRC.

The South is wet
The weather is not cooperating as well everywhere in Europe. In Spain, Portugal, and southern France, persistent rain has caused local problems. Some rivers have burst their banks, and there are fields that are standing or have stood under water. Damage to winter cereals appears to be limited according to the JRC, but it has significantly hampered fieldwork. In eastern Romania and Bulgaria, the situation is somewhat comparable to southwestern Europe. Damage to winter cereals appears to be limited, but fieldwork has come to a standstill for the time being.

In the Baltic States and parts of Poland, a lack of precipitation is a cause for concern. There is still sufficient moisture in the soil, but if the drought persists, it could have consequences for the further growth of crops in this region, according to the JRC.

The average wheat yield in the EU for the 2026 harvest is estimated by the JRC at 5,98 tonnes per hectare. That is 5% lower than the previous harvest but 2% above the five-year average. The fact that wheat in the EU is in reasonably good condition on average is confirmed by FranceAgriMer. In fact, 84% of winter wheat in France is in good or excellent condition, writes the service, which falls under the French Ministry of Agriculture.

Decree per social
The fact that grain prices on the futures markets took a step back is, of course, not solely due to relatively favorable growing conditions in Europe. Developments in the Middle East also play a significant role in this. Yesterday, Trump sent a message to the world via his own social media channel, Truthsocial, stating that the US is in talks with Iran about an end to the war. According to the American president, American attacks on Iranian energy infrastructure have been paused for five days. Iran initially denied that talks were being held with the Americans. This was later slightly nuanced. Communication with the US is reportedly taking place through friendly countries.

The unrest in the Middle East is felt here primarily at the gas pump and through rising fertilizer prices. That same problem, and perhaps even worse, is also playing out in Australia. In the country down below Arable farmers are about to sow winter cereals. Due to high prices for diesel and fertilizer, and moderate grain prices, growers are forced to make different choices in their cropping plan. Wheat, in particular, which is nitrogen-demanding, has become an expensive crop for Australian arable farmers.

Costs are skyrocketing
The wholesale price of diesel in Australia has risen from below AU$1,70 per liter (approximately €1 per liter) to AU$2,45 (approximately €1,50). In addition to the high price, there are also concerns about the availability of diesel. According to data from the Australian government, there is a thirty-day supply of diesel in stock. The nightmare scenario for Australian agriculture is that there is simply not enough diesel for the entire growing season, various Australian media report.

Urea has risen from AU$870 per ton (approx. €525) to AU$1.225 (€737). In some more remote regions, where transport naturally also weighs in on fertilizer prices, prices of AU$1.600 (approx. €963) for urea are already being quoted. In Australia, a large proportion of nitrogen is applied to winter wheat at sowing. Consequently, many growers already have a stock of fertilizer on hand before sowing the winter wheat. Buying additional fertilizer now is an expensive hobby. Various stories can be found in Australian media about growers who are cutting back on their wheat acreage and want to sow lentils, chickpeas, or barley instead.

All in all, this could have major consequences for the grain harvest in Australia. In the worst-case scenarios, there is even talk of the harvest being halved due to a shortage of diesel and fertilizer. It is unlikely to come to that, but it is realistic that Australian farmers will have to watch their costs closely and that this could come at the expense of yields.