Paris Wheat Futures Plummet as Bearish Drivers Converge

The Paris wheat futures market has entered a bearish phase, with contracts hitting contract lows amid a confluence of technical and fundamental headwinds. The benchmark December futures contract for soft wheat (FR0000000207) has dropped to €195/ton—its lowest since early 2021—amid surging export competition, supply overhangs, and deteriorating technical conditions. This article examines the drivers of the decline, evaluates near-term risks, and outlines a bearish trading strategy.

Export Competitiveness Erosion: Euro Strength and Cheaper Rivals

The euro's rise to $1.12 in early 2025 has eroded EU wheat's global pricing advantage. A stronger euro elevates EU wheat's dollar-denominated price, making it less competitive against cheaper Black Sea and U.S. alternatives. Russian wheat, for instance, now trades at $244–$246/ton FOB (free-on-board), $6–$7 cheaper than EU wheat. Meanwhile, U.S. wheat prices have dipped to $235–$240/ton FOB due to logistical bottlenecks and ample supplies.

This dynamic has reshaped buyer preferences. Egypt's state grain buyer, GASC, has increasingly sourced Black Sea wheat in recent tenders, while Algeria—traditionally a key EU buyer—has delayed tenders amid political uncertainty. The shift underscores a broader trend: EU wheat's market share in North Africa, which accounts for 20% of global wheat imports, is shrinking.

Supply Surpluses: EU Harvest Estimates Signal Oversupply

Strategie Grains and Coceral, two leading agricultural analysts, have revised EU wheat production estimates upward to 133.6 million tonnes for 2025/26, a 3% year-on-year increase. This surplus, combined with a global stockpile forecast of 262.8 million tonnes (the lowest since 2021), has created a supply-demand imbalance.

The EU's robust harvest contrasts sharply with U.S. crop challenges: U.S. wheat stocks are expected to drop to 898 million bushels, but this reflects production constraints rather than demand-driven scarcity. Meanwhile, Black Sea exporters are leveraging their cost advantages to undercut EU prices, further depressing demand for European wheat.

Technical Downside Risks: Support Breakdown and Short Positions

Technically, the Paris wheat market is in free fall. The December contract has broken through its €200/ton psychological support—a critical level that defined the bottom of the 2021 bear market. Analysts now eye €190/ton as the next key support, with resistance near €210/ton.

Open interest data reveals a surge in short positions, with speculative funds increasing net shorts by 20% in the past month, signaling widespread bearish sentiment. The Relative Strength Index (RSI) has dipped below 30, suggesting oversold conditions—but oversold markets can remain so for extended periods if fundamentals remain weak.

Strategic Trade Actions: Buyers Flee to Cheaper Alternatives

Egypt's GASC recently awarded a tender for 600,000 tons of wheat to Russian and Ukrainian suppliers at prices €15/ton below EU offers, highlighting the cost advantage of non-EU wheat. Algeria, meanwhile, has delayed its tender cycle, citing domestic production gains and a weaker dinar—both of which reduce its reliance on EU imports.

Investment Recommendation: Short Paris Wheat or Bearish ETFs

Position: Establish a short position in Paris wheat futures or consider the Teucrium Wheat Fund (NWZ), which mirrors futures prices.

Target: Aim for €190/ton by year-end, with a stop-loss above €210/ton.

Risk Factors:
- Weather: A severe summer drought in the EU or U.S. could tighten supply, reversing the bearish trend.
- Geopolitical Supply Disruptions: Black Sea logistics bottlenecks (e.g., Ukrainian port delays) or a Russia-Ukraine ceasefire could reduce Black Sea wheat availability, favoring EU prices.
- Monetary Policy: A sudden ECB pivot to rate cuts could weaken the euro, improving EU wheat's competitiveness.

Conclusion

The Paris wheat market faces a perfect storm of weakening demand, surging supply, and technical breakdowns. While risks like weather and geopolitical shifts remain, the near-term outlook is unmistakably bearish. Traders should capitalize on the decline while monitoring key support levels and geopolitical developments.