Shorting CBOT Wheat Futures: A Confluence of Oversupply Risks and Technical Opportunities

The Northern Hemisphere wheat harvest season is shaping up as a battleground of oversupply risks, driven by U.S. production gains, Russian export dynamics, and shifting EU-Ukraine trade flows. For traders positioned to exploit these trends, a short strategy in CBOT wheat futures emerges as compelling, though with tactical caveats. Here's the roadmap.

1. USDA Acreage and Production: A Subtle Oversupply Signal

The USDA's July 2025 WASDE report revealed a nuanced but critical shift: U.S. wheat production is projected to rise to 1.929 billion bushels, a 0.4% increase from June's estimate, despite modest winter and spring wheat acreage cuts. While harvested area for hard red winter wheat dropped by 36 million bushels, improved yield assumptions (52.6 bushels/acre) and strong durum wheat output offset losses.

Crucially, ending stocks for 2025/26 now stand at 890 million bushels, a 5% year-on-year increase. This surplus, combined with raised export estimates (+25 million bushels to 850 million), signals a market balancing toward oversupply.

2. Russia's Export Duty Removal: A Double-Edged Sword

While Russia eliminated its wheat export duty (effective July 9–15), the move's impact is clouded by internal production constraints. Despite the duty cut, Russia's 2025 harvest is projected to fall by 9.8% to 81.6 million tonnes, due to droughts and logistical bottlenecks. Exports are forecast at just 2–2.6 million tonnes in July, down 33% year-on-year.

The duty removal's real threat lies in its price competitiveness: Russian wheat now trades at $220–249/ton FOB—below U.S. and EU rivals—potentially flooding markets like Egypt and Turkey. However, delayed harvests and port congestion (only 30% of shipments arrive on time) limit short-term export upside.

3. EU-Ukraine Trade Shifts: More Supply, Less Stability

Ukraine's wheat exports have plummeted to 12.5 million tonnes (as of March 2025), down 30% from 2023/24 levels, due to reduced stocks and reliance on Danube routes. Yet EU imports of Ukrainian wheat have surged, with nearly half entering duty-free. This has two effects:

1. Increased EU Supply: Reduced EU exports (as they absorb Ukrainian grain) add to global oversupply.
2. Logistical Risks: Congestion at Romania's Sulina Channel and rising port costs may delay shipments further, creating temporary price spikes but long-term downward pressure.

4. Technical Analysis: Shorting with a Safety Net

CBOT wheat futures have trended downward since March 2025, hitting a 12-month low of $5.30/bushel in early July. Key technical levels:
- Resistance: $5.75 (May 2025 high)
- Support: $5.20 (2024 lows)

A short entry at $5.50 with a stop-loss above $5.75 offers a risk/reward ratio of 1:2. Traders should also monitor short-covering rallies if prices dip below $5.30, as panic buying could trigger a rebound to $5.50.

5. Investment Strategy: Short CBOT Wheat with Technical Flexibility

Recommendation: Establish a short position in CBOT wheat futures at $5.50, targeting $5.20 with a stop-loss above $5.75.

Risks to the Thesis:
- Weather Disruptions: Unseasonal heat in the U.S. or Ukraine could cut yields.
- Policy Volatility: Russia's duty removal could be extended or reversed.

Counter-Risk Play: Use 5% of capital for short-covering opportunities if prices test $5.20, capitalizing on potential panic-driven rebounds.

Conclusion

The confluence of U.S. production gains, Russian price competition, and EU-Ukraine supply dynamics creates a structurally bearish backdrop for wheat prices. While short-term volatility (e.g., weather scares) may test nerves, the long-term trajectory favors oversupply. Traders who pair a disciplined short strategy with technical flexibility stand to capitalize on this dynamic.

Stay nimble—this harvest season is ripe for those who short the wheat storm.