El Nino points to potential upside in global grain market

Global grain markets remain at considerable risk to the effects of the El Nino weather event, according to analysts at the International Grains Council (IGC), who have identified a 90% chance that it will have a “very strong” impact this year.

At an IGC briefing on Friday (25 September), the analysts said the peak impact of it is expected in November.

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“El Nino does raise the risk [of crop losses], but does not affect each continent in the same way,” said Nathan Kemp, IGC senior economist.

Tighter supplies would potentially support better prices in the months ahead. 

IGC’s latest briefing put global wheat production down 3% year-on-year at 819m tonnes, with seven of the eight main wheat producing countries reporting smaller crops due to a combination of dry weather and changes in crop rotations towards more profitable oilseeds.

Closing stocks, however, are up 3m tonnes on its last estimate at 278m tonnes. 

Global maize production is also predicted to be 3% down year-on-year at 1.3bn tonnes – largely due to smaller crops in the US, Brazil and Argentina.

IGC cut carryover stocks by 4m tonnes to 289m tonnes – a drop of 20m tonnes, year-on-year.

Europe has also faced a difficult year, with drought resulting in low yields and, in some cases, crop abandonment, said the IGC.

Looking ahead, the pressure may remain as growers turn to less risky crops, with those relying on maize for feed looking to alternative sources like barley.

Price impacts

Declines in availability are likely to put upward pressure on prices heading towards winter.

However, against expectations, Chicago wheat futures continued to fall following the report – indicating that geopolitical uncertainty surrounding potential peace deals in conflict zones such as Ukraine and the Middle East continues to hold a strong influence.

In the week to 21 September, nearby Chicago wheat futures fell from the equivalent of £199.34/t to £190.79/t  – down £29.54/t from the recent high on 3 September.

London wheat futures followed suit, declining from £211.25/t to £203.50/t in the week to 28 September.

UK ex-farm feed wheat prices went from £204/t on 23 September to £198.5/t one week later.

Harvest estimates

This is despite the final AHDB harvest estimate for 2026 which suggests winter wheat yields dropped to 6.9t/ha due to the summer drought – 11% below the national five-year average.

Spring barley averaged 4.8t/ha – 17% below the five-year average, while oats were down 14%, averaging 4.6t/ha, said AHDB.

“Average yields only tell part of the story,” said Helen Plant, AHDB lead analyst.

“We have seen huge differences between farms, with factors like soil type, drilling date, previous cropping, local weather conditions and moisture availability all influencing final performance.”

Anthony Hopkins, AHDB director added: “The areas and crops with the most significant hit to yields have also often faced the greatest impact on quality.” 

This has seen many malting barley crops downgraded to feed, putting downward pressure on values.