Global Wheat Output Set to Fall 23 Million Tonnes in 2026-27 as El Niño, Iran Conflict Bite

Global wheat supplies are heading into a meaningful deficit in 2026-27. The International Grains Council (IGC) has placed production at 821 mt, down from 844 mt this season — a decline of 23 mt. At the same time, consumption is projected to rise to 828 mt from 822 mt, driven by higher food, seed, and industrial use, while global trade volumes are expected to shrink to 205 mt from 216 mt.

The result: ending stocks are forecast to fall to 279 mt from 285 mt, tightening the cushion the market has relied on in recent seasons. The US Department of Agriculture echoes this concern, projecting a 3 per cent year-on-year fall in global output, while noting that US wheat acreage has dropped to its lowest point in nearly a century — a stark signal of how deeply structural the current supply squeeze has become.

Two forces are reshaping planting decisions across major producing regions:

Fertiliser costs: The Iran conflict has disrupted shipments of fertiliser raw materials from the Persian Gulf, raising input costs sharply for wheat growers in North America and Australia.

El Niño weather risks: A strong El Niño — expected to persist until March — is already bearing down on crop conditions. Heat and dry stress have emerged across the northern US Plains, while soils across western Europe have remained unusually dry since March, with successive heatwaves worsening the situation in France, Germany, Belgium, and the UK.

In Canada, farmers have expanded canola acreage to a record level, according to Statistics Canada, while reducing wheat area. Plantings under barley, soyabean, and corn are also expected to rise, per Producer.com, at the expense of wheat, oats, lentils, and dry peas. In Australia, wheat sowing has fallen to a seven-year low, reflecting the same twin pressures of high fertiliser costs and El Niño anxiety.

Western Europe is confronting one of its more difficult crop years in recent memory. According to COCERAL, Europe's grain trade association, total grain production across the EU and the UK is forecast at 263.2 mt for 2026, down sharply from 286.6 mt in 2025 — a decline of more than 23 mt.

Common wheat (excluding durum) is projected at 140.8 mt, compared with 149.8 mt last year. COCERAL attributed the losses to heatwaves that disrupted grain filling in central and southern France, southern Germany, Austria, Poland, and Hungary. Spain's crop estimate was also revised downward after late-May heat caused more damage than initial assessments had anticipated.

Analysts warn the full impact of the current El Niño may still be ahead — with disruptions to next year's harvests potentially more severe than what is already being priced in for 2026-27.

Wheat markets are already reflecting the supply tightness. Chicago Board of Trade (CBOT) wheat futures are trading at $6.54 a bushel ($240.30 a tonne), approaching the two-year high of $7 a bushel ($257.21 a tonne). The USDA has pegged the US season-average farm price at $6 a bushel ($220.46 a tonne).

On the trade side, larger exports from Argentina, Russia, and Ukraine are expected to partially compensate for lower Canadian shipments — but overall global trade volumes are still projected to fall. Russia, typically the world's largest wheat exporter, faces its own headwinds: research firm SovEcon expects Russian wheat exports to decline to 44.6 mt in 2026-27 from 46.5 mt, citing ongoing disruptions to Black Sea trade — including the closure of the Sea of Azov due to the Ukraine war.

Analysts broadly agree that these supply-side constraints should provide a price floor, limiting the scope for any significant near-term decline in global wheat prices.

While the 2026-27 outlook is already concerning, analysts caution that the more serious test may arrive in 2027-28. If the strong El Niño persists through March as expected, its full effects on cropping calendars — particularly for winter wheat sown later this year — may not materialise until the following season's harvest.

Geopolitical risks are compounding the uncertainty. The Ukraine war continues to disrupt Russian and Ukrainian export logistics, and the Iran conflict is keeping fertiliser input costs elevated across multiple producing regions. Together, these factors reduce the likelihood of a swift demand-side rebalancing.

For now, market participants are watching CBOT futures closely. With global ending stocks falling and acreage under pressure across three continents, the direction of travel on wheat prices appears firmly upward — absent a significant and rapid resolution to either the El Niño or the geopolitical disruptions currently shaping global supply.