Rabobank cut Australia’s 2026/27 wheat crop forecast Tuesday to 21.3 million tons, a 41% drop from the 35.8 million tons just harvested.1 The print stacks onto an El Niño event firming up and a fertilizer cost base still elevated from the Iran conflict.
The numbers under the headline are worth sitting with. Australian wheat planting area is pegged at 9.8 million hectares, down 20.4% year-over-year and roughly 24% below the five-year average.2 RaboResearch’s Vitor Pistoia called it “a more uneven and weather-dependent cropping area than in recent years,” pointing to mixed weather, elevated fertilizer and diesel costs, and a developing El Niño signal.3 Pulses and canola gained area at wheat’s expense as growers re-optimized around input costs. Reduced wheat acreage has left the market grappling with a simple reality: you can’t reap what you don’t sow.
Australia’s Impact on Global Wheat
Australia is the world’s fourth-largest wheat exporter, behind Russia, the EU, and Canada and ahead of the US.6 The country shipped 23.49 million tons of wheat and durum in marketing year 2024/25, its fourth-largest export program on record.7 That works out to roughly 11% of global wheat trade. A 14.5 million tons production hit means that buyers in Indonesia, the Philippines, Vietnam, China, and the Middle East are going to be looking for other sources to fill any potential shortfall.
Global wheat trade can absorb a single bad year from one exporter. However, a bad year across multiple producers is harder for markets to absorb.
El Niño Watch
NOAA’s Climate Prediction Center is on El Niño Watch. The May 14 ENSO discussion put odds at 82% for May–July 2026 and 96% for December 2026 through February 2027.8 Australia’s Bureau of Meteorology echoes the signal, with models pointing to at least a moderate event and possibly a strong one. BOM’s May–July outlook calls for below-average rainfall across most of the eastern and southwestern Australian wheat belt.9
Still, El Niño doesn’t hit all grain producers the same way.
Australia, India, and Indonesia tend to dry out. India’s Meteorological Department forecast the 2026 southwest monsoon down 8% versus the long-period average, one of the lowest opening prints in 26 years.10
Brazil’s safrinha corn, which pollinates into the dry season, is the most vulnerable second crop in the grain complex. Still, Conab’s May projection has 2025/26 second-crop corn at 108.5 million tons, fractionally below last year.11 No signs of worry, yet.
Argentinian farmers, on the other hand, tend to benefit from increased moisture during El Niño cycles. El Niño typically brings above-average rainfall to the Pampas, which is supportive for the 2026/27 soy and corn crops there. USDA FAS has Argentine soybeans at 49 million tons for the new year.12
Wheat doesn’t operate in a vacuum. If Australia loses 14 million tons of production at the same window Brazil’s safrinha is at risk and India’s monsoon comes in light, the global feed-and-food balance tightens across multiple commodities at once, shifting demand to other exporting countries, among them Argentina and the U.S.
Fertilizer is a Compounding Factor
The Iran conflict that opened in late February has done real damage to the global fertilizer trade. The Strait of Hormuz handles roughly 40% of global urea exports out of Iran, Qatar, and Saudi Arabia, plus about 4 million tons of DAP a year.13 Farmdoc daily’s May read on US prices: anhydrous ammonia ran from $828/ton in the Sept 2025–Feb 2026 window to $1,123/ton on April 17, a 36% move.14 UAN-28% climbed 25% to $543/ton. World urea roughly doubled through April versus pre-crisis levels.15
That math is what’s pushing Australian growers to cut wheat acreage. Wheat is the most fertilizer-intensive of their winter crop options, and pulses (which fix their own nitrogen) gained acreage at wheat’s expense. The same calculus is running everywhere wheat is grown.
For an Allocator, This Matters
Wheat has been the loudest grain on the tape in 2026. The +26% YTD print in SRW4 and +32% YTD in HRW5 is not a quiet market. The setup now stacks three layered drivers on top of an already-firm price: an Australian crop that potentially loses 14 million tons of production, an El Niño event with 96% odds of being entrenched through next winter, and a fertilizer cost base that has compressed grower margins globally and may continue to pressure planted area into the southern hemisphere spring.
All of the above is, on the surface, thought to be price supportive. Yet there are bearish factors at play. The existing global supply is adequate. Last year’s crop was healthy, bringing the stocks/use ratio (current supplies/projected usage) to a 3-year high. Projections for the current crop year show only a modest tightening of the balance sheet.
Demand destruction is another factor that could weigh on prices. Wheat at ~$7 per bushel is a real hurdle, particularly for price-sensitive buyers in North Africa and South Asia. As the saying goes, high prices cure high prices.
What we’d watch through July: Australia’s Bureau of Meteorology June 1 monthly climate update, USDA’s June 30 acreage and quarterly stocks report, and any further escalation around Hormuz. In our view, the risk asymmetry on wheat into the second half of 2026 leans skewed to the upside, though a peaceful resolution in the Gulf and/or a favorable weather outlook could pull that back quickly.
Past performance is not indicative of future results. This post is for informational purposes only and does not constitute investment advice.
Forward-Looking Statements
This communication contains forward-looking statements based on current expectations, publicly available data, and third-party sources as of the date of publication. These statements involve significant risks and uncertainties — including weather, policy changes, geopolitical developments, and USDA report outcomes — that could cause actual results to differ materially. Forward-looking statements are not guarantees of future market outcomes and should not be relied upon as such.
Nothing in this communication constitutes investment advice or a recommendation to buy or sell any commodity, futures contract, or other financial instrument. Futures trading involves substantial risk of loss and is not suitable for all investors.
Notes
1. Rabobank Australia, “Australia Looks to Smaller Winter Crop, Impacted by Mixed Weather and High Input Costs” (media release, May 26, 2026), https://newshub.medianet.com.au/2026/05/australia-looks-to-smaller-winter-crop-impacted-by-mixed-weather-and-high-input-costs/154898/.
2. Rabobank, “Australia Looks to Smaller Winter Crop,” May 26, 2026.
3. Vitor Pistoia, quoted in Rabobank Australia, “Australia Looks to Smaller Winter Crop,” May 26, 2026.
4. Bloomberg L.P., W 1 Comdty (Generic 1st CBOT Wheat Future), PX_LAST and CHG_PCT_5D/YTD daily data, accessed May 26, 2026, https://www.bloomberg.com.
5. Bloomberg L.P., KW1 Comdty (Generic 1st KC HRW Wheat Future), PX_LAST and CHG_PCT_5D/YTD daily data, accessed May 26, 2026, https://www.bloomberg.com.
6. USDA Foreign Agricultural Service, “Australia: Grain and Feed Annual,” April 2026, https://www.fas.usda.gov/data/gain/2026/04/australia-grain-and-feed-annual.
7. Grain Central, “Australia Caps Off Stellar Grain Export Year,” accessed May 26, 2026, https://www.graincentral.com/markets/australia-caps-off-stellar-grain-export-year/.
8. NOAA Climate Prediction Center, “ENSO Diagnostic Discussion,” issued May 14, 2026, https://www.cpc.ncep.noaa.gov/products/analysis_monitoring/enso_advisory/ensodisc.shtml.
9. Australian Bureau of Meteorology, “ENSO Outlook” and “Long-Range Forecasts,” May 2026, https://www.bom.gov.au/climate/enso/outlook/.
10. India Meteorological Department, 2026 Southwest Monsoon Forecast, cited in Global Agriculture, “India’s 2026 Monsoon Forecast at 92%,” 2026, https://www.global-agriculture.com/india-region/indias-2026-monsoon-forecast-at-92-irrigation-gains-to-buffer-output-rainfed-risks-persist/.
11. Conab (Companhia Nacional de Abastecimento), May 2026 Grain Production Survey, summarized in World-Grain, “Conab Sees Brazil’s Grain Harvest at 358 Million Tonnes,” May 2026, https://www.world-grain.com/articles/22759-conab-sees-brazils-grain-harvest-at-358-million-tonnes.
12. USDA Foreign Agricultural Service, “Argentina: Grain and Feed Annual,” April 2026, https://www.fas.usda.gov/data/gain-report/2026/04/Grain%20and%20Feed%20Annual_Buenos%20Aires_Argentina_AR2026-0006.pdf.
13. Joseph Glauber and David Laborde, “How Fertilizer Policies Could Exacerbate Hormuz Price Shocks,” International Food Policy Research Institute (IFPRI) Blog, 2026, https://www.ifpri.org/blog/how-fertilizer-policies-could-exacerbate-hormuz-price-shocks/.
14. Gary Schnitkey et al., “Fertilizer Cost Increases Resulting from the Iran Conflict,” farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, May 2026, https://farmdocdaily.illinois.edu/2026/05/fertilizer-cost-increases-resulting-from-the-iran-conflict.html.
15. Schnitkey et al., “Fertilizer Cost Increases,” May 2026.
