Wheat Still Waiting on a Reason for a Rally 1/12/2026

(Chicago) The USDA’s January reports reinforce a consistent message for wheat: the U.S. balance sheet has loosened further, and the adjustment mechanism remains price and inventory management rather than demand expansion. In the January WASDE, U.S. wheat ending stocks for 2025/26 were increased to 926 million bushels, reflecting higher beginning stocks and weaker domestic use. This revision was not driven by supply surprises late in the season, but by slower-than-expected disappearance during the first half of the marketing year. From the USDA’s standpoint, wheat is not moving fast enough through domestic channels to prevent carryover growth.

On the demand side, the revisions were telling. Feed and residual use was reduced by 17% or 20 million bushels, acknowledging that wheat is struggling to compete into feed rations amid ample corn supplies and soft feed demand. Food use was also trimmed, signaling that milling demand has not accelerated despite lower prices relative to recent years. Exports were left unchanged, a subtle but important signal that USDA does not expect the U.S. to gain pricing power or reclaim market share in a highly competitive global wheat environment. The cumulative effect is a demand profile that is steady but insufficient to absorb existing inventories.

The December 1 Grain Stocks report confirms this interpretation. Total U.S. wheat stocks were reported near 1.68 billion bushels, approximately 7 percent higher than a year earlier. While September through November disappearance improved modestly year over year, the pace was not strong enough to materially tighten inventories. Of particular note is the composition of stocks. On-farm inventories declined, while off-farm stocks increased, suggesting that ownership has shifted toward commercial hands rather than remaining with producers. This pattern is consistent with a market that remains well supplied and commercially comfortable rather than one experiencing scarcity stress.

Looking forward, the Winter Wheat Seedings report introduces some constraint on future supply, but not enough to rewrite the story told by existing stocks. USDA estimates 2026 winter wheat planted area at 32.99 million acres, down roughly 160,000 acres from last year. The decline was concentrated in hard red winter and white winter wheat, while soft red winter acreage was relatively stable. While this confirms that U.S. wheat acreage is not rebuilding aggressively, the reduction is modest relative to current carry-in stocks. In USDA’s framework, acreage restraint alone is insufficient to materially tighten the balance sheet without a corresponding yield shock.

Globally, wheat remains an abundant market. USDA increased production estimates for major exporters, including Russia and Argentina, raising exporter ending stocks and reinforcing intense competition in world trade. With Black Sea wheat continuing to set the marginal price and South American supplies improving, U.S. exports face structural headwinds rather than cyclical opportunity. From the USDA’s perspective, the global wheat market is not short bushels, and price recovery will require either significant weather adversity or a demand shift that is not yet visible in the data.

For producers, the implication is not that wheat prices cannot rally, but that rallies remain vulnerable without a fundamental catalyst. In the USDA’s accounting, wheat is a market working through excess stocks, leading to prices trying to stimulate demand rather than rationing limited supply. Until inventories draw down meaningfully or global supply is disrupted, the bearish trend seems likely to remain dominant.

Today’s USDA reports triggered sharp, fast-moving market reactions. For producers who want real-time visibility into futures and cash markets, FBN TradeDesk provides live quotes and market access throughout the trading day.

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