Wheat's Rally Ahead? Why Supply Snags and Geopolitics Favor a Long Position in CBOT September Contracts

The Chicago Board of Trade (CBOT) wheat futures have spent much of 2025 hovering near multiyear lows, but a confluence of supply-side disruptions, geopolitical risks, and strategic demand dynamics is setting the stage for a rebound. Traders eyeing the September 2025 contract (ZWU5) should consider the growing tailwinds for a price recovery, with technical signals aligning to support a bullish stance.

1. Russian Export Snags: The Catalyst for Tightening Supplies

Russia's wheat exports—once a reliable global stabilizer—are now a source of instability. Drought in key Black Sea regions, logistical bottlenecks, and a strong ruble have slashed shipments to record lows. By July 2025, exports fell to 1.12 million tons in June, a 75% drop from June 2024, with delays at ports like Novorossiysk creating a “short squeeze” dynamic. The FAO notes global wheat prices have risen 15% since March as buyers scramble for alternatives.

The Agriculture Ministry's emergency measures—including a zero export duty through mid-July—have done little to resolve supply shortages. With the 2025 harvest projected at 81.6 million tons (a 9.8% drop from 2024), Russia's 53–55 million-ton export target for 2025 looks increasingly unachievable. This creates a structural deficit for global traders, especially in key markets like Egypt and Turkey, which rely on Russian wheat.

2. U.S. Harvest Progress: A Mixed Picture with Hidden Upside

The USDA's July 13 harvest report reveals a 63% completion rate for winter wheat, slightly below the five-year average. While yields in the Southern Plains are average, delays due to excess moisture and disease could trim final output. The USDA's July WASDE report trimmed U.S. winter wheat production to 1.349 billion bushels, a 2% drop from June estimates, implying tighter domestic stocks.

The spring wheat crop, now emerging in the Northern Plains, faces uneven conditions. While favorable moisture exists in parts of Montana and North Dakota, delays in planting could limit yields. Analysts warn that a 4.9% profit margin for U.S. farmers leaves little room for further price declines, creating a floor for prices near $5.30/bu.

3. Algerian Tenders: A Demand Catalyst Ignored by the Market

Algeria's state grain agency, the OAIC, has quietly become a linchpin for wheat demand. Recent tender calls for 100,000–200,000-ton shipments are likely to escalate as the country seeks to replenish stocks ahead of Ramadan in September. With Russian supplies unreliable, Algeria is turning to the U.S., France, and Romania—all of whom require higher prices to meet delivery terms.

The OAIC's preference for 12.5% protein wheat at FOB prices above $230/ton signals a willingness to pay premiums for reliable supply chains. This demand could push CBOT prices toward $5.75/bu, the 2023–2025 resistance level.

4. Tariff Uncertainties: A Hidden Bullish Factor

U.S. trade tensions with the EU and Mexico over agricultural tariffs are creating unintended opportunities for wheat. Proposed 30% tariffs on EU and Mexican wheat imports, delayed until late 2025, could force buyers to pivot to U.S. suppliers. Even a partial shift would tighten global supplies further, as the U.S. lacks surplus capacity to absorb sudden demand spikes.

Meanwhile, Canada's strong dollar and Australia's dry season in key growing regions add to the bullish case. A weaker U.S. dollar (USD index below 95) would also enhance U.S. wheat competitiveness globally.

Technical Analysis: A Bullish Setup

CBOT September wheat has formed a bullish ascending triangle pattern since early July, with resistance at $5.55/bu and support near $5.30/bu. A breakout above $5.60/bu—a 2024–2025 pivot point—could trigger a rally to $5.90/bu, the 50% Fibonacci retracement level from the 2023 high.

Investment Thesis: Go Long on ZWU5

Position: Buy CBOT September wheat futures (ZWU5) at $5.40/bu.
Stop-Loss: Below $5.25/bu (the 50-day moving average).
Target: $5.75/bu by mid-August, with upside to $5.90/bu if geopolitical risks escalate.

Risks to Consider:
- A sudden Russian export surge (unlikely given logistical constraints).
- A stronger ruble further depressing farmer selling.
- U.S. spring wheat yields exceeding expectations.

Conclusion: Wheat's Turnaround Is Imminent

The combination of Russian supply shortages, U.S. harvest uncertainties, Algerian demand, and trade policy risks creates a compelling case for a short-term rebound in wheat prices. Technical indicators and fundamental data suggest September contracts are poised to climb out of their 2025 trough. For traders willing to navigate near-term volatility, this could be the entry point for a $0.35–$0.50/bu gain by autumn—a yield opportunity worth harvesting.

Disclaimer: This analysis is for informational purposes only. Always conduct your own research or consult a licensed financial advisor before making investment decisions.