TURF WAR:
Hard Times for Hard Red
- The US’s 2026 Hard Red Winter (HRW) wheat crop has faced a litany of weather challenges.
- The market has, correctly in our view, assessed that production will fall and so bid prices higher.
- Comfortable US wheat inventories likely cap further gains for now.
- Still, the wheat market is on track to lose much of its US inventory buffer.
- The market will thus become more sensitive to crop markdowns, in the US or elsewhere.
TURF WAR: Hard Times for Hard Red
The US’s 2026 Hard Red Winter (HRW) wheat crop has faced a litany of weather challenges. Multiple extreme temperature events have likely damaged crops. Heat this week is yet another challenge on a long list. More important is the ongoing lack of moisture. The western strip of HRW regions has had little or no moisture since last autumn. Many HRW crops are, consequently, struggling. The affected area is shown in the map below.
This region has long been a concern. We have had most of this region on our Watchlist since temperatures started warming in the northern spring. The crops broke dormancy in dry soils. And, other than fleetingly, soils have remained dry since. Crops were thus very likely struggling or, in some cases, dead. Crop condition surveys have provided corroborating evidence. As have anecdotes from growers and others in the region. We think these crops are unlikely to recover much, even if normal precipitation returns. The best case is halting the losses, and current weather forecasts suggest even that is unlikely.
SIGNIFICANT SCALE
The troubled area is material at the US and global scale. This area accounted for around 19% of US wheat production in season 2025. And a bit over 1% of global wheat production. Clearly, widespread losses in this region can have a material impact on overall supply.
The weather-related production losses are likely substantial. However, they are not the only reason for lower production (2026 v 2025). The 2026 starting point was lower anyway, for a couple of reasons. Firstly, planting is perhaps a little lower. And secondly, season 2025 featured above-trend yields and below-trend abandonment. Together, those factors imply, conservatively, that 2026 US production is likely at least several million tonnes lower. The weather-related losses in this region can also amount to several million tonnes. The combined trend reversions and weather problems sum to a hefty reduction in HRW production. The USDA will publish their take tonight in the WASDE. We expect the USDA will record much of this region’s losses in those estimates, but they may not be the final cut.
That prospective production decline, while large, needs to be weighed against hefty US and world inventories
COMFORT, NOT SPEED
The global and US wheat supply context is important for assessing the impact on prices. Coming out of 2025, world wheat inventories are, at worst, neutral and perhaps even comfortable (lhs chart below). And, US wheat inventories are certainly comfortable (rhs chart below). The market thus has the capacity to absorb substantial crop losses.
Also, the US, among major exporters, has high inventories relative to exports. This feature has long weighed on US prices.
Importantly, much of that US inventory comfort is HRW wheat. A large contribution from HRW is perhaps obvious. This class is the US’s largest wheat crop by a big margin. Too big, in fact. The US inventories that have weighed on US prices for several years are, in large part, HRW wheat. HRW’s share of US inventory is substantially larger than its share of US production or exports. That extra HRW inventory is important because the US inventory buffer directly offsets smaller HRW crops.
The US HRW losses, therefore, have to be hefty to make a meaningful difference to US and global SnDs.
BALANCING IT UP
Just how much of a loss? The chart below gives some indications of the sensitivities in the US case. Note, these 2026 numbers are purely reductions in production and stocks – all the other balance sheet items have been left unchanged. Of course, ceteris paribus for the others is highly unlikely to be the case, but this approach is more transparent. The chart shows that, even for hefty 8mmt drop in US production, US stocks to use ends ‘mid’ rather than ‘low’.
PRICE GAINS ENOUGH – FOR NOW
Wheat prices have gained sharply recently. Some of that rise is because of the likely HRW losses. Unsurprisingly, the price gains in Kansas futures have been larger than Chicago futures. The resulting prices are not high in a longer historical sense (see charts below). Nonetheless, the rally has been sizeable. Kansas Dec ’26 was languishing at single-digit percentiles in mid-February. A whole lot of bad weather, as well as Gulf War 3, has since boosted that percentile past 30.
The retreat in prices from the late-April peaks suggests the rally has run out of steam. The price action, though, is being heavily influenced by Gulf War 3’s evolution. However, underneath that influence, we think the impetus from US production losses has dissipated. Not because of any optimism about US production, but more because the impact has been priced. Even with large US production cuts, the US is moving from excessive inventories to more neutral inventories.
Going forward, the likely US production loss still has an impact. The wheat market has lost much, perhaps all, of its US inventory cushion. Wheat prices will thus become more sensitive to lower production, in the US or elsewhere. The USDA’s estimates tonight will re-anchor the market around this risk.
