Supply Pressures and Rising Risks in Global Cereal Markets

The International Grains Council’s (IGC) August assessment reveals that global cereal markets are heading towards a tighter supply outlook for the 2026/27 season compared with the previous month. Driven by downward revisions to production forecasts for wheat, maize and sorghum, total global grain production has been revised downwards by 5 million tonnes to 2.416 billion tonnes. Whilst production is expected to fall by 3 per cent year-on-year, total output is still forecast to remain at the second-highest level on record.

In particular, hot weather conditions in Europe are adversely affecting the production outlook. The fact that the European Union’s forecast has been revised downwards for the second consecutive month indicates that the impact of weather conditions on yields and harvested areas during the 2026/27 season is becoming increasingly pronounced. Despite higher opening stocks, the decline in production is expected to reduce total supply by 1 per cent.

A modest decline is also forecast on the consumption side. Global cereal consumption has been revised down by 3 million tonnes on a monthly basis to 2.444 billion tonnes, and is expected to record a slight annual decline. However, due to the more pronounced contraction in production, closing stocks are expected to fall by 4 million tonnes to 606 million tonnes. The fact that this level is 4 per cent below last year’s figure indicates that the market has entered a more sensitive period in terms of supply security.

Trade and Geopolitical Risks

According to the IGC report, the grain trade forecast has been revised upwards by 1 million tonnes to 451 million tonnes. This revision was driven in particular by the European Union’s growing need for maize imports. However, developments in the Black Sea region remain one of the key risks facing the trade outlook. The near-complete halt to deep-sea shipments from Ukraine via Russia’s port of Novorossiysk, due to security risks, is having a particular impact on wheat trade. It is estimated that since the intensification of hostilities in mid-July, exports have remained approximately 4 million tonnes below normal levels.

The outlook for soya beans, however, is more positive. Higher production expectations, particularly in the US and Brazil, support the forecast that global production for the 2026/27 season will reach a record high. Driven by demand from the feed, food and biofuel sectors, usage is expected to rise by 3 per cent year-on-year, whilst global trade is forecast to reach a new record of 190 million tonnes. Feed demand in Asia is one of the key drivers of this increase, whilst China’s recent purchases are reinforcing expectations of a moderate recovery in US shipments.

Whilst rice production for the 2026/27 season is expected to fall by 1 per cent year-on-year, rising food demand is supporting global consumption. It is forecast that stocks could contract for the first time in four years, with reserves in India also likely to decline. Strong import demand in Africa and Asia, however, could pave the way for trade to reach record levels in 2027.

The IGC’s August report also highlights regional production disparities in the pulses market. Whilst a high chickpea harvest is expected in India, declines, particularly in Australia, are forecast to drag down global production. Carryover stocks are expected to rise due to flat consumption and high opening stocks.

General market indicators, meanwhile, confirm the rise in risk perception. This outlook could further heighten market sensitivity in the coming months. The IGC Grains and Oilseeds Index (GOI) rose by 3 per cent compared with the July assessment, driven by concerns over geopolitical and weather conditions. The wheat index rose by 2 per cent, maize by 3 per cent, rice by 3 per cent and the soya bean index by 4 per cent. The picture painted by the IGC report suggests that production losses, shrinking stocks and rising geopolitical risks in global grain markets could continue to exert pressure on prices in the coming period.