What record temperatures and El Nino mean for EU wheat prices

Price moves

*Fertiliser prices have retreated, taking to about 7-8% declines from highs reached in early April, six weeks into the Iran war.

Granular urea shed £13/t to £611/t in the week to 15 May, AHDB data show, with imported ammonium nitrate (AN) shedding £17/t to price below £500/t for the first time in more than two months.

The market’s softening reflects reports of China reopening to urea exports, and signs of high prices crimping demand by, for example, spurring farmers to plant less nutrient-intensive crops. 

However, India’s announcement of a urea tender, and talk of China enforcing a price floor on its exports, is expected to limit nitrogen price downside for now.

With wheat prices remaining relatively high, the affordability of nitrogen, as measured by the ratio of imported AN to feed wheat values has eased to 2.65 - meaning that 1t of fertiliser is worth 2.65t of wheat - not far above the pre-war level of 2.43.

*Red diesel prices have echoed crude oil values in easing modestly, but remaining well above pre-war levels.

Will heatwave and El Nino combine to lift EU grain prices?

Europe’s grain crops have dodged one spell of adverse weather, in the dry start to spring.

Can they escape another? The heatwave which has seen temperature records broken in the likes of France, Ireland and the UK has sparked market unease of crop losses.

London and Paris wheat futures, having lagged Chicago peers for most of 2026, have turned the tables this week. London November-26 ones have eased by less than 1% in dollar terms, even as Chicago’s December-26 lot has shed 3%.

Early-May rainfall is broadly assessed to have come just in time for western European crops. Official crop condition ratings for French winter barley and soft wheat, for instance, have pulled out of the declines seen in late April.

However, there is plenty of time yet for weather to take a toll. The correlation between French soft wheat condition scores and final yield is still weak at this time of year, limiting the extent to which FranceAgriMer’s current above-average reading of 80% good or excellent is a guide.

Ratings can still decline markedly before harvest. In 2016, the score tumbled from 86% good or excellent in mid-May to 33% by the time of the last reading, in August. This reflecting heat and dryness which dragged France’s soft wheat yield below 5.4t/ha, a result which remains France’s weakest this century.

Still, disappointing yields need not necessarily translate into high prices, as 2026/17 shows, when Paris prices, while improving from the previous season, stayed close to six-year lows. A tightening in European stocks was more than offset by supply growth in Australia, Canada, Russia and the US.

Certainly, 2026/27 looks unlikely to provide this degree of supply comfort.

Although Russia looks poised for robust 2026 wheat production, the US harvest has already been forecast by the USDA at a 54-year low, wet and cold weather slowed Canada’s spring sowings to a crawl, while Australian prospects are overshadowed by the looming El Nino, with its history of bringing the country drought.

Rabobank this week pegged Australia’s 2026 wheat crop at 21.3Mt – down more than 40% year on year.

Nonetheless, markets should temper expectations for the potential boost to Europe’s export programme.

The EU stands to gain some business should low Australian harvest forecasts prove correct, but is not a natural replacement origin.

Combined EU soft wheat exports to Australia’s top customers - China, Indonesia, Japan, the Philippines, South Korea and Yemen - average 2.6Mt a year, less than 10% of the EU’s total export programme, with perhaps 2Mt upside, as in 2023/24.

Nor does the EU look perfectly placed to scoop up that much business from the US, bar Nigeria. Europe has a modest history of exports to the likes of Colombia, Mexico, Thailand and Taiwan, key buyers of US wheat. Argentina, for which El Nino tends to boost wheat output, looks a more natural alternative in many cases.

Meanwhile, Europe faces a setback to demand prospects from its key customer base of North Africa, where a record regional harvest is seen by the USDA as limiting imports by Algeria, Egypt, Morocco and Tunisia to a five-year low of 26.9Mt in 2026/27.

These four countries account for an average of more than one-third of EU soft wheat shipments.

Of course, there is potential yet for further boosts to EU wheat price prospects, from perhaps rouble strength undercutting Russian competitiveness, besides whatever weather has in store.

However, as highlighted a decade ago, it would be premature to bank on deteriorating European crop prospects - should they be realised - necessarily translating into a price rally.

Weather outlook

Europe faces an unusually wet week ahead (chart above), at least in western countries such as France, Spain and the UK, although temperatures will be around average further east in the likes of Romania.

The heat will, however, be accompanied by rains, particularly from early next week, which will persist. Indeed, the second week of June is forecast as being marked in Germany, the UK and most of France by showers with relatively modest temperatures. Heat will be limited to southern and eastern Europe.

Further ahead, weather maps show the second half of June proving dry and relatively hot, through Europe.

Data

• Price seasonality of wheat, barley, oats and OSR
• First forecasts for UK 2026 wheat crop