Global wheat prices are strengthening, but not because the world is running short of wheat, according to new research from RaboResearch.
Current market strength is driven by growing disruption to global grain trade, rising freight and insurance costs and broader geopolitical instability – all of which are reshaping both wheat prices and production costs for wheat growers, including in Australia.
Report author, senior grains and oilseeds analyst Vitor Pistoia said the market was pricing the reliability of grain flows rather than an outright shortage of wheat.
“The world is not short of wheat. The challenge is getting grain to buyers reliably and at an acceptable cost,” Mr Pistoia said.
“Current wheat prices reflect geopolitical risk and supply-chain disruption more than supply scarcity.”
RaboResearch said wheat futures markets point to stronger prices into 2027.
In early October, the 2026 CBOT wheat forward curve was largely pricing in a drop in Black Sea wheat exports, with prices into mid-2027 pointing toward the AUD 365 to AUD 370/tonne range, compared with AUD 325 to AUD 335/tonne three months earlier, Mr Pistoia said.
Australian port prices are expected to broadly track movements in international markets and could remain well supported while export disruption persists, he said.
“If we see a ceasefire, a new export agreement or a restoration of Black Sea export capacity, part of the current risk premium could unwind relatively quickly.”
For Australian growers, disruption to the Red Sea and other major shipping routes could improve the relative competitiveness of local grain exports, particularly into Asian markets.
“Australia is well positioned in key Asian export markets compared with northern hemisphere exporters facing longer and potentially more disrupted shipping routes,” Mr Pistoia said.
This advantage could strengthen the basis for Australian grain into 2027, although the benefit to growers may be partly offset by rising input and freight costs.
While wheat prices have strengthened, the report warns production costs remain a major concern. Disruption affecting the Strait of Hormuz, the Red Sea and the broader Middle East is influencing energy markets, fuel costs, freight and fertiliser supply chains.
“For Australian growers, stronger grain prices are welcome, but higher input costs continue to erode margins,” Mr Pistoia said.
“Diesel, fertiliser and freight costs are being affected by many of the same geopolitical pressures supporting grain prices. In some cases, production costs have risen more sharply than wheat prices.”
The report notes diesel typically accounts for around four to six per cent of on-paddock operating costs, while continuity of supply can be more important operationally than its share of total costs.
Fertiliser presents the larger planning and profitability risk because procurement decisions often need to be made months ahead and fertiliser is frequently the largest variable cost in wheat production.
“Typical diesel lead times are around 30 to 40 days, while fertiliser deliveries can take several months,” Mr Pistoia said.
“That means fertiliser presents a much larger planning and budget risk for growers.”
The report also identifies weather as an increasingly important factor beyond the current season.
While the impact of El Niño on the 2026 -27 crop is expected to be limited, the larger risk is for eastern Australian grain production in 2027-28 if the event contributes to lower winter rainfall and reduced yields.
“Positive margins can still be achieved during periods of elevated costs, as we have seen previously,” he said.
“The challenge for growers is managing the timing, volatility and scale of both wheat-price and input-cost movements.
“The opportunities are there, but disciplined risk management will be critical.”