Weather Whiplash and Geopolitical Tensions Create a Wheat Futures Buying Opportunity

The wheat market has been a tempest of volatility in June 2025, with weather disruptions and geopolitical tremors pushing prices to multi-month highs. While long-term fundamentals remain bearish due to global oversupply, the confluence of adverse weather in key producing regions and supply chain uncertainties has created a compelling short-term buying opportunity for traders.

Weather: The Catalyst for Immediate Volatility

The U.S. winter wheat harvest, already delayed by relentless rains in Oklahoma and Kansas, has stalled further. By June 16, just 3% of Kansas's crop was harvested, far below the 11% five-year average. Persistent rains are now forecast to turn into heatwaves, risking crop quality and delaying harvest timelines. Meanwhile, China's northern plains face drought, threatening to shrink its wheat output—a critical factor given China's status as the world's largest wheat producer.

In Europe, the weather picture is equally divided. While Spain and Romania benefit from favorable rains, France, Germany, and the UK are grappling with dryness that could reduce yields. Russia's Krasnodar and Rostov regions, major wheat exporters, have declared drought emergencies, prompting protective buying in European markets. These combined stresses have driven CBOT wheat futures up by 2.5–4.6% since mid-June, reaching a two-month high.

Geopolitical Risks: A Secondary Tailwind

Geopolitical dynamics are amplifying market anxiety. Algeria's recent wheat tender, favoring European suppliers, highlighted regional demand resilience. Meanwhile, Ukraine's new crop prices have surged to $207–210/MT for food wheat, reflecting concerns over reduced yields amid ongoing geopolitical instability. Russia's drought-driven production cuts, despite its expanded planting areas, add another layer of uncertainty.

The EU's projected 135.6–136.6 million MT wheat harvest for 2025/26—up from 120–122 million MT—has not yet eased market nerves. Buyers remain cautious about uneven crop conditions and logistical bottlenecks, particularly in drought-affected regions.

Technical and Fundamentals: A Bearish Long-Term Outlook, But Bulls Rule Short-Term

The USDA's June WASDE report underscored a bearish backdrop: U.S. ending stocks for 2024/25 were revised down to 898 million bushels, but global stocks remain elevated. EU and Russian surplus production continues to weigh on prices, especially in Europe, where the strong euro and ample supply have kept Euronext wheat prices under pressure.

However, technical factors are favoring bulls. Hedge funds, which held net short positions in CBOT wheat for three years, have reduced their bearish bets by 26% since June 10, triggering short-covering rallies. The September contract is now testing resistance at $5.94, while the December contract approaches $6.19. If these levels hold, further upside could follow.

Investment Strategy: Seizing the Opportunity

Traders should take advantage of the weather-driven volatility to position for a short-term rally. Key entry points include:
1. Buy CBOT September futures if the $6.20 support holds, with a stop-loss below $5.90.
2. Consider selling puts at $5.50, capitalizing on the likelihood of price consolidation above this level.
3. Monitor USDA export sales reports and weather updates closely. A pickup in U.S. harvest progress or a resolution of European drought concerns could trigger a pullback.

Long-term investors, however, should remain cautious. Global oversupply, weak demand from Asia (notably India and Pakistan), and a strong euro zone currency could cap gains by year-end.

Conclusion

The wheat market is caught in a tug-of-war between short-term risks and long-term realities. While adverse weather and geopolitical tensions are fueling immediate volatility, they also create a narrow window for aggressive traders to profit. For now, the technical setup and speculative short-covering suggest a bullish bias until harvest clarity emerges.

Trade with discipline—this is a short-term play in a bear market.

Analysis as of June 19, 2025.