Wheat Futures Drop Ahead of Critical WASDE Report: What Investors Need to Know

Wheat futures have faced significant downward pressure in recent weeks, with the May 2025 contract (ZWK25) trading near multiyear lows amid bearish supply dynamics and weak export progress. As the U.S. Department of Agriculture (USDA) prepares to release its May World Agricultural Supply and Demand Estimates (WASDE) report on May 12, traders are bracing for key updates on global wheat production, demand, and carryover stocks. Below, we analyze the factors driving current price weakness and the implications of the upcoming report.

Current Price Dynamics: A Bearish Backdrop

Wheat futures have fallen sharply since the April WASDE report, which increased U.S. old-crop ending stocks by 27 million bushels (mb) to 846 mb. The May 2025 contract (ZWK25) hit a new contract low of $5.05 3/4 per bushel on May 9—a decline of 1.46% from prior levels—amid persistent oversupply concerns. Key drivers include:
- Export Competition: U.S. wheat faces intense price competition from Black Sea exporters, particularly Russia and Ukraine, whose discounts are undermining U.S. export competitiveness.
- Technical Weakness: Wheat futures remain near the 35th percentile of their five-year price range, signaling oversold conditions but little buying interest.
- Basis Erosion: In Ontario, old-crop soft red winter (SRW) wheat prices have fallen to $6.43 per bushel, with new-crop bids at $6.68, as a stronger Canadian dollar weakens export competitiveness.

Key Factors Ahead of the May WASDE Report

The May WASDE will refine supply-demand forecasts for both the 2024/25 (old-crop) and 2025/26 (new-crop) marketing years. Analysts expect the following adjustments:
1. Old-Crop U.S. Ending Stocks: Likely unchanged at 845 mb, reflecting slow export progress. As of May 1, shipments totaled 700 mb, leaving only 120 mb needed to meet USDA’s 820 mb target—a stretch given recent cancellations.
2. New-Crop Production: Based on USDA’s March acreage estimate of 45.4 million acres (the second-lowest since 1919), analysts project a 2025/26 crop of 1.896 billion bushels (bb)—3.8% lower than 2024’s 1.971 bb. This assumes a yield of 50.1 bushels per acre (bpa), though weather risks in key growing regions could disrupt this.
3. Global Supply: Analysts anticipate a slight reduction in global wheat stocks to 259.8 million metric tons (mmt), down from 260.7 mmt in April, driven by tighter supplies in China and Russia.

Global Supply and Demand Risks

• China: The world’s largest wheat producer faces dry conditions in key regions, potentially cutting yields and exports.
• Russia: Recent rainfall improved winter wheat prospects, but global demand uncertainty persists.
• Trade Tensions: U.S.-China trade disputes continue to hamper wheat exports, while Canadian farmers grapple with retaliatory tariffs on aluminum and autos, further depressing basis levels.

Market Outlook and Investment Implications

The May WASDE report’s impact hinges on three key variables:
1. Acreage and Yield Revisions: Any upward adjustment to production estimates (e.g., higher yields or harvest percentages) could deepen price declines. Conversely, lower-than-expected U.S. yields or reduced global exports could provide support.
2. Export Progress: If USDA lowers its 2024/25 export target or revises new-crop demand higher, prices may stabilize.
3. Weather: Persistent drought in the U.S. Southern Plains or adverse conditions in Black Sea regions could disrupt supply and trigger short-term rallies.

Historical data shows the May WASDE has a 55% chance of triggering a negative price reaction for wheat, with average losses of 11 cents per bushel during bearish outcomes. Bulls, however, may find hope in technical support near $5.00 per bushel and potential long-term demand from emerging markets.

Conclusion: Navigating the Wheat Market Ahead of WASDE

Investors should monitor the May WASDE report closely for clues on U.S. production, global supply, and export demand. Key data points to watch include:
- Old-Crop Ending Stocks: A USDA estimate above 850 mb could amplify bearish sentiment.
- New-Crop Yield Assumptions: A yield below 50.1 bpa would tighten supplies, while higher estimates could depress prices further.
- Global Carryover: A reduction in global stocks to 259.8 mmt may signal tighter markets, but this hinges on weather and geopolitical stability.

In the short term, wheat futures are likely to remain range-bound between $5.00 and $5.50 per bushel, with volatility tied to the WASDE outcome. Traders bullish on wheat should consider scaling into positions below $5.00, while bears may target shorts above $5.50 until supply imbalances ease. Ultimately, the May report will set the tone for prices through the 2025/26 harvest—a period where weather and trade policy will dominate the narrative.

Stay tuned for the USDA’s release on May 12—this could be the most pivotal market-moving event for wheat investors in 2025.