The EU Wheat Bear Market: Why Prices Are Stuck Below €200/tonne—and How to Profit

The European Union's wheat market is in the throes of a perfect storm. A combination of surging inventories, intensifying competition from Russia and Ukraine, and shifting geopolitical trade dynamics has created a structural oversupply that could keep prices languishing below €200 per tonne for years. For investors, this is a clear signal to consider bearish strategies—while avoiding the trap of overestimating weather-driven production cuts.

The Supply Glut: Why 'Surging' Inventories Matter

The EU's wheat production is expected to hit a record 133.6 million tonnes in the 2025/26 season, per the International Grains Council (IGC). This 3% year-over-year increase has fueled a stockpile buildup, even as exports face headwinds. However, here's the catch: not all production is equal.

While Romania—a key exporter—has shipped over 7.1 million tonnes of grain (including 4.7 million tonnes of wheat) to non-EU markets since July 2024, other major producers like France are struggling. France's 2024 harvest dropped 26% below the five-year average due to poor weather and lower grain quality. This has forced French exports to collapse from a 10 million-tonne annual average to just 3.5 million tonnes in 2025.

The paradox? Even with record EU-wide production, logistical bottlenecks and geopolitical risks are slowing exports. Rising fuel costs for Black Sea shipping (VLSFO prices have spiked by 30–50% since 2023) are making it harder to move grain efficiently, while proposals to restrict Ukrainian grain flows through Romanian ports threaten to disrupt trade further.

The Demand Dilemma: Russia's Pricing Power and EU-Ukraine Trade Quotas

The EU's main competitors are not just other wheat exporters—they're price undercutters. Russia, armed with state subsidies and a weaker ruble, is flooding global markets with wheat priced €30–€50/tonne below EU levels. Meanwhile, Ukraine, despite ongoing geopolitical tensions, has secured expanded access to EU markets, squeezing EU exporters further.

Add to this the EU's own trade policies: new quotas for Ukrainian grain imports, aimed at stabilizing regional supplies, are diverting demand away from EU-produced wheat. African and Middle Eastern buyers—the EU's traditional export markets—are increasingly turning to cheaper alternatives, leaving EU producers with a surplus they can't sell.

Why Weather Won't Save the Day (And Why Investors Should Care)

Bullish traders often cite European drought risks as a reason to bet on wheat rallies. But here's why that's a losing proposition:

1. Geographic Resilience: France and Germany, which account for 60% of EU wheat production, have seen uneven drought impacts. While some regions face yield cuts, others are unaffected, balancing the overall supply.
2. Storage Capacity: The EU's grain silos are already 90% full, leaving little room for additional stockpiles—even if yields dip slightly.
3. Global Carryover: The IGC forecasts global wheat stocks will tighten, but this is driven by U.S. maize shortages, not EU wheat scarcity. EU-specific inventories remain oversupplied.

Investment Strategy: Short Wheat, Hedge with Derivatives

The data paints a clear picture: EU wheat prices are likely to stay below €200/tonne for the foreseeable future. Here's how to profit:

1. Short Wheat Futures: Sell contracts on Euronext's wheat futures (FR0010803207), targeting a price decline to €180–€190/tonne by year-end.
2. Bearish ETFs: Consider the iPath Dow Jones-UBS Wheat Subindex ETN (EWP), which tracks wheat prices. A short position here could amplify gains as prices fall.
3. Options Trading: Buy put options on agricultural ETFs like the Teucrium Wheat Fund (NWHE) to capitalize on volatility.

The Bottom Line: Don't Bet on a Wheat Recovery—Yet

The EU wheat market is caught in a bearish cycle fueled by overproduction, logistical bottlenecks, and geopolitical shifts. While weather could introduce temporary volatility, structural imbalances ensure prices will stay depressed. Investors who ignore these fundamentals—and chase “drought plays”—risk being left holding the bag.

Act now: Short wheat, hedge with derivatives, and avoid overreacting to weather rumors. The EU's wheat bear market is here to stay.

Data sources: International Grains Council (IGC), Food and Agriculture Organization (FAO), U.S. Department of Agriculture (USDA).