EU Wheat Prices Rebound Amid Global Demand Surge and Chicago Linkages

The European wheat market has staged a notable recovery in early 2025, rebounding from contract lows to stabilize at €211.25 per metric ton by April 3, driven by correlations with Chicago wheat futures, robust international demand, and shifting geopolitical dynamics. This resurgence, however, masks underlying vulnerabilities tied to supply forecasts, trade tensions, and weather risks. Below, we dissect the key drivers and risks shaping EU wheat’s trajectory.

The Chicago-EU Wheat Nexus

European wheat prices remain tightly coupled with movements in Chicago’s wheat futures, which in turn are influenced by U.S. supply concerns and global trade policies. On April 3, Euronext’s May milling wheat futures rose 1% after Chicago’s May SRW wheat futures opened at $5.30¼ per bushel, buoyed by drought worries in U.S. winter wheat regions. This intermarket link is further amplified by currency fluctuations: the euro’s recent strengthening against the dollar has pressured EU exporters, while a weaker pound has inflated UK wheat prices to £173.55 per ton for May contracts.

Demand Surge: North Africa and Beyond

The rebound is also underpinned by strong physical demand from key importers. Algeria, a traditional EU buyer, sourced 600,000 tons of wheat in late March—likely from Black Sea and Balkan suppliers—while Tunisia purchased 75,000 tons. These transactions reflect a broader shift as North African buyers prioritize competitively priced EU wheat amid a weaker euro. Algerian tenders, in particular, have emerged as a critical stabilizing force, with traders expecting further purchases ahead of Ramadan demand.

However, EU wheat faces stiff competition from Russia and Ukraine. Despite Russia’s reduced 2025/26 production forecast (79.7 million tons), its lower pricing and logistical advantages retain market share. Meanwhile, Ukraine has already shipped 13 million tons of its 2024/25 crop, underscoring its role as a low-cost alternative.

Supply Forecasts: Oversupply Risks Loom

While demand has provided short-term support, EU wheat’s long-term outlook is clouded by an expected supply glut. Strategie Grains raised its 2025/26 EU soft wheat production forecast to 128.1 million tons, a 13% year-on-year increase. This surplus is compounded by the International Grains Council’s upward revision of global wheat output to 806 million tons, though U.S. drought risks could trim this figure.

Geopolitical and Trade Risks

The EU’s struggle to regain export momentum—shipments fell 36% year-on-year—is partly attributable to U.S. tariffs and Franco-Algerian diplomatic tensions. U.S. tariffs on wheat exports to Japan, South Korea, and China have indirectly boosted EU competitiveness in those markets, but retaliatory measures (e.g., a 20% U.S. tariff on EU wheat) threaten to disrupt trade flows further.

Weather and Currency Volatility

Weather remains a wildcard. Drought stress in France and Germany—home to 60% of EU wheat production—could reduce yields if rains fail to materialize by mid-April. Conversely, improved Franco-Algerian relations might open new export avenues, though political risks linger. Currency swings also loom large: a stronger euro could erode EU wheat’s price advantage, while a weaker pound may inflate UK wheat prices beyond sustainable levels.

Conclusion: A Volatile Equilibrium

EU wheat prices are caught in a tug-of-war between short-term demand resilience and long-term supply pressures. The market’s rebound to €211.25/ton reflects supportive factors like Algerian tenders and Chicago-linked liquidity, but risks—including a 36% export slump, U.S. tariff wars, and drought threats—limit upside potential. Investors should monitor three critical indicators:

1. North African tender activity: Algerian purchases (600,000 tons) and Tunisia’s demand will set near-term price ceilings.
2. Weather forecasts: April rains in France/Germany and U.S. Plains conditions will dictate supply uncertainties.
3. Currency movements: The euro’s trajectory against the dollar and pound will shape export competitiveness.

While EU wheat may find temporary support at current levels, a sustained recovery hinges on resolving trade disputes, avoiding supply shocks, and securing export markets. For now, the market remains a precarious balancing act between hope and headwinds.