EU Wheat Prices Struggle Amid Harvest Optimism and Export Challenges

The European wheat market finds itself in a precarious balancing act: a robust 2025 harvest forecast is clashing with sluggish export demand, geopolitical trade barriers, and currency headwinds, keeping prices near multi-year lows. While strategists anticipate a bumper crop of 137.2 million metric tons—a 9% increase over 2024—market fundamentals suggest oversupply risks could outweigh the bullish harvest narrative. This article dissects the forces at play and evaluates the investment landscape for stakeholders in agricultural commodities.

Harvest Forecasts: A Double-Edged Sword

The COCERAL crop report projects EU wheat production to rebound to 137.2 million tons in 2025, up from 2024’s weather-hampered 125.1 million tons. This recovery stems from improved growing conditions in Western Europe, where mild spring weather and timely rains aided crop development. However, the forecast is 3.2 million tons lower than December’s initial estimate, due to reduced plantings in France and the UK caused by autumn soil saturation.

The Strategie Grains analysis adds nuance: while yields in core regions like France and Germany are expected to normalize after 2024’s poor performance, global supply is set to hit 806.4 million tons (per the IGC), amplifying oversupply risks. A 13% year-on-year surge in EU production alone could push prices downward, as domestic stocks swell and export competitiveness faces stiff competition from Black Sea producers.

Demand Dynamics: North Africa vs. Structural Overhang

Despite the harvest optimism, physical demand remains lackluster. North African buyers—Algeria and Tunisia—have been key stabilizers, sourcing 675,000 tons in late March. However, EU wheat’s €211.25/ton price tag (as of April 3) struggles to compete with cheaper alternatives:
- Russian wheat trades at €195/ton, leveraging logistical advantages and lower input costs.
- Ukrainian exports have already shipped 13 million tons of their 2024/25 crop, underscoring their dominance in cost-sensitive markets.

The currency war further complicates matters. A stronger euro—up 2.3% against the dollar in Q1 2025—has eroded EU exporters’ price competitiveness. Meanwhile, the British pound’s slump has inflated UK wheat prices to £173.55/ton, creating unsustainable pricing in regional markets.

Trade Barriers: Geopolitical Crosswinds

EU wheat exporters face a minefield of trade policies:
1. U.S. tariffs: Proposed 20% levies on EU wheat imports to Japan and South Korea threaten to divert Asian buyers toward Black Sea suppliers.
2. Internal restrictions: Hungary and Romania’s export limits—aimed at stabilizing domestic prices—have tightened global supplies, paradoxically pressuring EU prices via reduced trade liquidity.
3. Franco-Algerian ties: Improved relations could open new export avenues, but political instability in North Africa remains a wildcard.

The Bear Case: Oversupply and Structural Weakness

Analysts warn that even a strong harvest may not be enough to offset systemic challenges:
- Global supply gluts: The IGC’s 806.4 million-ton global forecast leaves little room for EU wheat to command premium pricing.
- Logistical bottlenecks: EU ports face 10% higher shipping costs in early 2025, eating into profit margins.
- Policy risks: The European Commission’s proposed €200/ton price cap—opposed by farmers—could further suppress prices if implemented.

Investment Outlook: Short-Term Pain, Long-Term Uncertainty

The near-term picture is bleak:
- Price ceiling risks: Algerian tenders—critical to price discovery—might cap EU wheat at €215/ton until July, with downside exposure to Black Sea competition.
- Weather wildcards: Drought stress in France (accounting for 30% of EU wheat) could trim yields if April rains fail, but this is unlikely to reverse the oversupply narrative.

Longer term, investors should monitor:
1. U.S. drought conditions: Chicago wheat futures—currently at $5.30/bushel—could rise if Plains droughts intensify, indirectly supporting EU prices.
2. Trade deal progress: EU-Ukraine grain agreements and U.S. tariff resolutions could reshape regional dynamics by late 2025.

Conclusion: Stuck in a Bear Market

EU wheat prices are unlikely to recover significantly in 2025, with €200–€215/ton becoming the new equilibrium. The 13% production surge and €806.4 million-ton global supply overshadow demand resilience, while trade barriers and currency pressures act as drags. Investors in agricultural commodities should consider:
- Short positions in EU wheat futures (Euronext contracts) to capitalize on oversupply.
- Long exposure to Black Sea wheat (e.g., Russian/Ukrainian exporters) benefiting from cost advantages.
- Diversification into corn or barley, which face less structural overhang (EU corn output is up 1.6% to 63.3 million tons).

The EU wheat market’s struggle epitomizes the broader agricultural dilemma: abundant supply meets fragmented demand in a politically volatile world. For now, bulls bet on harvest delays or geopolitical shocks—but the data favors bears.