Geopolitical Tensions Drive Volatility Across Global Grain Markets

Insight Focus

Forward View

• Short-term wheat prices are likely to remain volatile, with rallies driven mainly by geopolitical shocks or weather risks in key regions.

• Barley is expected to trade under pressure, with limited upside as strong 2025 stocks meet smaller but still adequate 2026 output.

• Corn and soybean markets should remain supported by tight fertiliser supplies and strong import demand, though regional weather and trade developments could trigger swings.

Wheat

Wheat markets have been dominated by escalating geopolitical tensions, particularly the US–Israel conflict with Iran, which has shut the Strait of Hormuz to most vessels and triggered extreme volatility across commodity markets.

Wheat prices have experienced sharp hour by hour swings as funds unwind long held short positions and market participants react to rapidly changing risk conditions.

Higher energy prices linked to the conflict are feeding directly into wheat production and logistics costs, while volatility in natural gas markets continues to disrupt global fertiliser supply, adding further uncertainty.

The March USDA WASDE report was largely overshadowed by geopolitical events, despite upgrading global wheat production to a record 842.1 million tonnes. Export adjustments were modest, with increased shipments from Argentina and Kazakhstan offsetting reductions for Russia, Ukraine and the EU.

Meanwhile, global end stocks for 2025/26 were trimmed slightly to 276.96 million tonnes. Funds have since moved toward flat positions in US and Paris futures, leaving markets susceptible to sharp moves driven by fresh news from conflict zones.

Looking ahead to the 2026 harvest, crop conditions remain mixed. The US hard red wheat crop has deteriorated in recent weeks, falling from 58% to 52% good/excellent. India has issued an optimistic forecast of 120.2 million tonnes for its 2026 crop, although extreme heat threatens these expectations.

Brazil is projected to harvest significantly less due to a 15% drop in acreage, potentially increasing its import needs. Early European assessments signal no major production issues, although prolonged wet conditions have reduced French crop ratings. Cold snaps in Ukraine may have impacted up to 20% of its wheat area, with additional Black Sea weather risks expected.

Source: USDA

Trade flows have also begun to shift. The IGC has cut its 2026/27 global wheat production forecast sharply to 822 million tonnes while projecting increased consumption of 829 million tonnes.

Source: IGC

Ongoing conflicts in the Black Sea continue to damage logistics infrastructure, threatening export performance for both Russia and Ukraine. Major importers such as Algeria and Saudi Arabia have stepped up purchases amid rising geopolitical uncertainty. Fertiliser export restrictions from Russia and China add to the cost pressures facing global growers, raising concerns that 2026/27 supply may tighten further.

Barley

Barley prices have broadly followed wider commodity trends, rallying amid the US–Israel–Iran conflict as energy and fertiliser markets experience severe disruption.

Global barley supply remains strong following an impressive 2025 harvest of 155–156 million tonnes, but expectations for 2026 point to smaller output as yields normalise and acreage declines.

Source: USDA

Current projections suggest production may fall to around 145 million tonnes, with world end‑stocks likely dropping from 23 million tonnes to roughly 20 million tonnes by the end of 2026/27.

Weather remains a crucial factor. French spring barley planting is nearly complete, though parts of Europe face delays from persistent wet conditions. In North America, farmers appear likely to plant despite challenging prices, while South American conditions have improved following recent rainfall.

Malting barley premiums continue to struggle, with Europe seeing no significant premium for the 2025 crop. Premiums for 2026 exist but remain fragile as fertiliser supply constraints threaten quality and yields. Fertiliser shortages driven by natural gas disruptions, halted production and Chinese export restrictions pose significant risks to barley output, particularly for malting varieties that require timely nitrogen application.

If shortages persist, farmers may prioritise higher input crops such as wheat, potentially oversupplying the malting barley market and eroding next season’s premiums.

Demand trends have been more positive. China and Saudi Arabia, two of the world’s largest barley buyers, continue to absorb significant volumes, supporting exporters across Australia, Canada and Argentina.

Improved trade relations between China and its suppliers have facilitated strong exports, particularly from Australia, where shipments are pushing port capacity to its limits. Despite weak malting premiums, feed barley values remain firm globally, providing underlying market support.

Soybeans

Soybean markets over the past month have been driven by geopolitical tensions, shifting trade expectations, record Brazilian supply and diverging price behaviour across the oilseed complex.

The US–Iran conflict pushed crude oil prices sharply higher, yet soybean prices diverged from this surge as China–US trade uncertainty and delayed summit expectations weakened demand sentiment. As crude prices climbed more than 50% above late February levels, soybeans fell back toward prewar levels, with Chicago futures dropping from USD 12/bushel on March 16 to the USD 11.50–11.60 range.

US soybean sales to China slowed considerably after a strong November–January period, with cumulative purchases reaching 11 million tonnes by mid March. Weekly inspections remained robust at around 500,000 tonnes, yet new sales announcements dwindled.

Source: USDA

The postponement of the planned Trump–Xi summit reduced the likelihood of China committing to additional US purchases within the 2025/26 marketing year. China imported just 38,000 tonnes of US soybeans in January, though February volumes rebounded to over 1.45 million tonnes.

Brazil remained the dominant force in global supply. Despite weather related delays and logistical disruptions, Brazilian production is projected to reach a record 177–183 million tonnes, with exports exceeding 110 million tonnes. Ship lineups indicated March shipments of 15–16.3 million tonnes, reinforcing Brazil’s central role in global trade.

Source: ANEC

Vegetable oil markets moved differently, with soybean oil rising 11% alongside an 42% surge in crude oil, reflecting its biodiesel linkage. Brazil’s FOB soybean prices rebounded early in March, while global vegetable oils—from Malaysian palm oil to Chinese rapeseed oil—registered strong gains.

Corn

Corn markets over the past month have been influenced by Black Sea disruptions, shifting acreage expectations, volatile fertiliser costs and weather driven production risks. Grains rallied early in March as disrupted vessel traffic in the Black Sea and worsening European weather tightened sentiment. Corn rose 2.6% over the week ending March 3, supported by soybeans and wheat, but the tone shifted midmonth as markets absorbed concerns over declining corn acreage in both the US and Europe.

Rising fertiliser costs have pushed farmers—especially smaller operations that buy inputs in spring—toward soybeans, which require less fertiliser. The question is not whether acreage will fall but by how much, as corn prices have traded below estimated production costs.

This shift is expected to provide underlying price support, with Chicago corn likely consolidating above USD 4.5/bushel while the Iran conflict continues to constrain fertiliser supply.

Fertiliser concerns intensified after an Iranian attack on Qatar’s largest natural gas field raised fears of global shortages. With 25%–30% of global fertiliser supplies moving through the Strait of Hormuz, markets grew increasingly anxious.

Corn’s late week rally on March 23 reflected this, aided by expectations of a forthcoming US biofuel package. In parallel, the March WASDE offered little change to US estimates but lifted global corn stocks by 3.8 million tonnes due to higher output in Brazil and Ukraine.

Source: USDA

South American production trends added further complexity. Brazil’s summer corn harvest ranged from 20–35% completion across reports, slightly behind last year, while Safrinha planting lagged seasonal norms. Argentina’s harvest also progressed slowly at 3–13% complete depending on timing.

These mixed signals reinforced uncertainty as markets entered the weather‑sensitive spring phase, with US dryness and European cold fronts posing additional risks for upcoming planting.