The following article comes from Edward Nikulin, weather model expert at Mind Money. This article touches on big themes such as food security, the impact of climate change, new agricultural techniques, and the background economic picture. In recent years, events such as the pandemic, and Russia's invasion of Ukraine – a major wheat exporter – have brought these topics to the forefront. 

The editors are pleased to share these views; the usual editorial disclaimers apply. Email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com

During Q1 2025, volatility prevailed across both grains and softs, driven by weather concerns, geopolitical risks, and evolving trade policies. Lately, many soft commodities have seen a significant rise in prices. For some, such as soybeans and coffee, this surge is primarily driven by fundamental factors, including the balancing act of global weather patterns. Meanwhile, other agricultural products have gained a noticeable lift thanks to the weakening US dollar. 

Wheat: Sitting pretty on high production, inventories
The International Grains Council (IGC) is projecting an increase in global grain production for the 2025/26 season, and this is starting to shape the market outlook. It suggests potentially more relaxed markets. Grain prices are expected to be significantly affected by the growth of new crops and the summer weather conditions in key producing areas.

The global wheat output is reported to be on the rise, particularly in the Southern Hemisphere, with the 2024/25 production reaching record levels. This surge is largely due to a significantly larger crop from Australia than initially anticipated, along with recovering supplies from Argentina, which have helped balance out the smaller harvests in the Northern Hemisphere. As a result, the market appears to be well-supplied overall. 

The global wheat trade is currently facing a slowdown due to weak demand from major importers. A significant factor is China's drastic reduction in import needs – 2024/25 imports are expected to drop by more than half compared with last year, as the country leans on a strong domestic harvest and its state reserves.

Additionally, some importers in North Africa and the Middle East have also reduced their purchases after restocking last year. While the ongoing conflict in the Black Sea adds a layer of uncertainty, both Ukraine and Russia have so far managed to keep grain shipments flowing through alternative routes. Talks in late March aimed at easing tensions and sanctions in the Black Sea region were seen as having little immediate effect on exports, as logistics had already adjusted to the situation.

Weather factor based grain crops outlook
In Russia, the area planted with winter wheat has declined for the third consecutive year. Coupled with low soil moisture and minimal snow cover, this increases the risk of frost damage, resulting in an expected annual decrease of about 2 per cent in production. Meanwhile, in the US, early predictions from ClimateAi suggest that key grains, such as oats, winter wheat, and soybeans, could face poor yields in 2025. This is mainly due to the expectation that 2025 might be one of the hottest years on record, which could put heat stress on these crops that usually thrive in cooler climates. 

Although the total area for grain in the US is set to increase thanks to more winter sowings and a rise in spring wheat acreage, yields are still projected to dip slightly due to mild drought conditions affecting a larger share of the winter wheat crop compared with 2024. Particularly, drought conditions persist in key Plains states, with more than a quarter of the crop in some areas rated as poor to very poor. Overall, US wheat production is expected to decline slightly. 

Elsewhere, the European Union is looking forward to a boost in wheat production in 2025, particularly in France and Germany, thanks to expanded planting areas and a return to more typical weather patterns after a challenging 2024. However, concerns exist about developing dry conditions in Eastern Europe and excessive rainfall in Western Europe, particularly in France, which could hinder overall yield improvements.

Overall, with the weather threat easing, US hard wheat prices have decreased by approximately $16 per ton since February. Similarly, early spring rains in parts of Europe and India are also helping to improve the outlook for 2025 wheat, keeping global prices stable.

Coffee: A rare combination of bullish factors
On the coffee (Arabica) front, the commodity prices soared, reaching a record high in Q1 2025 before pulling back in late Q1 and early Q2. Extreme weather in growing regions contributed to supply constraints and price increases. Most importantly, coffee stocks still lag behind the historical average of around 2,273 million bags, largely due to persistently low soil moisture levels in key growing areas, especially in Brazil and parts of Central America.

From late November 2024 to the end of February 2025, the ICE Coffee C futures price increased from about $326 to about $379 per pound, representing a 16 per cent rise. The peak in February hit 438.9 cents, marking a significant 34.6 per cent jump since the end of November last year. 

As of April 2025, although the weather situation is slowly improving, the lingering effects of the drought continue to impact coffee production. Soil moisture levels are low in crucial growing areas, particularly in Brazil and parts of Central America, which is delaying the recovery of coffee trees and affecting the consistency of flowering. Additionally, water stress has affected bean development, which could lead to lower yields and a higher proportion of lower-grade beans, potentially tightening the supply of premium coffee in the global market.