Wheat: The False Comfort of Global Stocks

Stocks That Deceive

Global carryover stocks are currently at a comfortable level of around 275 million tons, creating an illusion of comfort for observers of the global market. However, 120 million tons of these reserves are tied up in China (and 50 million in India). To date, China has never participated in the regulation of global prices; it seeks absolute food autonomy. The stocks available with the eight main global exporters have now fallen to historically low levels. They no longer have the necessary leeway to cushion potential future supply shocks.

Double Climate Penalty

The Northern Hemisphere is experiencing a sharp decline in yields due to the combined effects of extreme weather conditions (heatwaves, droughts, and localized excess rainfall). The cumulative production of the eight main global exporters has seen a massive drop of at least 50 million tons compared to the previous year. Europe is on the front line, particularly in France and Germany. Global forecasts have been revised downwards to 817 million tons by the International Grains Council.

While the North assesses the situation, the Southern Hemisphere is entering a phase of heightened surveillance due to the El Niño phenomenon. Traditionally a major supplier to Asia, including China, Australia is facing forecasts of declining yields due to a crucial lack of rainfall in its main grain plains. While Argentina hopes to navigate the situation, the intensity of El Niño raises the specter of torrential rains at harvest time, threatening the quality of the grain (difficult harvests, sprouted wheat, fungal diseases, etc.). Recent analyses suggest declines of 15-20% compared to last year, which was exceptional.

Black Sea: The Lock

Moreover, the near-total blockage of flows from the Black Sea must be taken into account. Exports via Odessa (Ukraine) are at a standstill, and the Russians have even sunk boats fully ready for departure. Additionally, the low water level of the Danube complicates Ukrainian exports significantly and increases costs. In return, the Ukrainians have rendered Novorossiysk (which is also a military port capable of launching Iskander missiles) and other Russian ports in the Black Sea unusable. About 17% of global supply is nearly frozen or slowed down. This September is the worst in 16 years: analysts expect a total volume of only 1.5 to 2 million tons exported for the entire month, compared to nearly 5 million tons on average in previous years according to Logistic OS.

If the paralysis in the Black Sea persists or worsens, and there is no sign of improvement, and if the harvests in the Southern Hemisphere confirm fears related to El Niño, the scenario for the coming year becomes "tense," and "catastrophic" scenarios are conceivable.

Mandatory Importers at a Crossroads

Furthermore, the integration of the structural dependence of North Africa and the Middle East (and some other East African countries), known as MENA, with the recent surge in agricultural input costs profoundly alters the one-year projections. The forecasting model shifts from a simple decrease in stocks to a risk of solvency crisis for purchasing countries and a major brake on the yields of future 2027 harvests, which could exacerbate the situation.

The MENA region is the largest wheat importing hub in the world. Egypt, Morocco, and Algeria are classified as "mandatory" importers because their food security depends on continuous massive external purchases. According to USDA projections, North African countries are expected to import about 29 million tons for the current campaign. This figure marks a slight decline (-13%) compared to the previous year due to a temporary improvement in local harvests, but needs remain immense and overall increasing, which is the situation for other African countries. Already, with prices on Euronext fluctuating at the end of August 2026 between 235 and 248 euros per ton depending on the deadlines, the state budgets of these countries are under strong pressure. Their local currencies are depreciating, making the purchase of wheat on global markets increasingly expensive. These countries traditionally imported up to 80% of their wheat via the Black Sea. The persistent logistical blockage will force them to turn to wheat from Western Europe (almost nonexistent) or the Americas, which will be at market prices.

Fertilizers: The 2027 Harvest Already Mortgaged

The fertilizer and energy market has experienced a real shock directly linked to geopolitical tensions in the Middle East and the blockage of strategic maritime routes. The blockage of Hormuz, as well as the destruction, restricts global access to ammonia and urea. Prices are soaring to such an extent that governments, such as in France, have had to trigger emergency fertilizer plans in the summer of 2026 to subsidize farmers' purchases (up to €70 per ton) to secure the 2027 harvests. Grain farmers do not always have the necessary cash flow given the catastrophic year of 2026.

Thus, for next year, global producers will face higher production costs (fuel, fertilizers). Farmers will reduce fertilizer doses per hectare or turn away from wheat in favor of less demanding crops (such as soybeans). A decrease of 10% to 15% in the use of nitrogen fertilizers would lead to a mechanical decline of 4% to 7% in global wheat production, resulting in a loss of 32 to 57 million tons. This calculation, made according to models developed by the FAO (Food and Agriculture Organization of the United Nations) and IFPRI (International Food Policy Research Institute), is based on the laws of the plant's agronomic response where the reduction of nitrogen is not entirely linear, due to the marginal efficiency of the soil, but remains destructive for demanding crops like wheat.

Furthermore, a large part of the harvest would shift from the "baking wheat" category (human food) to the "forage wheat" category (animal feed), further drying up the flour market. This loss of 32 to 57 million tons of wheat would instantly wipe out all safety stocks of major exporting countries, especially as the war between Russia and Ukraine continues.

This almost guarantees that the decline in global production this year will not be corrected next year. Yields per hectare for the 2027 harvest are likely to be structurally lower, particularly in developing countries that cannot afford to subsidize inputs and whose nitrogen-poor soils will not be able to compensate for this decrease in supply.

The Wheat, a Diplomatic Weapon

The intersection of these variables leads to a distinctly inflationary market scenario with a potential solvency crisis for mandatory buyers. It should be noted that, according to the FAO, if global stocks include isolated and protected domestic reserves (China, India), the carryover stocks of exporting countries will collapse within a year. There will be no more global "safety cushion." Wheat will become a diplomatic weapon. Dependent countries in the Middle East and Sub-Saharan Africa will have to make painful budgetary trade-offs to continue subsidizing bread for their populations, increasing the risk of social instability. It is known that the red line is around $280 per ton of wheat. "Hunger revolts" are therefore predictable.

Blind Spots: India, Russia, Rice

The World Bank's scenario of a rebound to 3.4% growth in 2027 is based on the assumption of a gradual reopening of energy trade routes and a return to normal by early 2027, which should bring global inflation back to around 3.9%. However, several unknowns could disrupt this scenario.

India occupies a particular position: relatively protected agriculturally, it depends 90% on imports for its fossil energy and currently benefits from low-priced Russian oil. What would happen if grains also crossed a critical threshold and if its rice production were affected by El Niño?

Russia claims it is covering the costs of domestic transport to the Baltic or Siberian ports, but none of these ports have proven to be safe from Ukrainian drones... It maintains an export potential while reducing it by 10% (if alternative corridors function). Furthermore, for secondary grains around the Mediterranean and Middle East, there do not seem to be any problems. As for rice, the current situation is not excellent. Weather forecasts from late August 2026 are particularly alarming. The U.S. agency NOAA (National Oceanic and Atmospheric Administration) and the World Meteorological Organization (WMO) confirm that an exceptionally intense El Niño episode, termed "Super El Niño," is underway and will intensify in the fall. One probable consequence would be, due to drought, a production decrease of about eight million tons, coupled with a lack of hydroelectric energy, putting several countries in a critical situation.

Where Are the Modelers?

The worst is never certain, but failing to anticipate it is a strategic mistake... For the first time in 20 years, a combination of independent real risks (climate, wars, blockades) concerns both current and future productions, looming over global food supply, particularly affecting the poorest countries... This risk is largely attributable to Russian and American policies, with climate being an uncontrollable factor (except for a global political will on greenhouse gas production).

But where are the modelers who would construct different scenarios based on hypotheses (possible climate crises, including monsoon in Southeast Asia), the Russia-Ukraine war, the U.S.-Israeli war against Iran)? In a situation that is both critical and unstable, such studies would be welcome...