Karen Brown

Large crops do not necessarily mean a surplus in supply. Global grain balances look relatively comfortable at the start of the 2026/2027 season, despite the expected decline in production compared to the record 2025/2026 season, according to the monthly global agricultural supply and demand estimates released by the U.S. Department of Agriculture last week.

Forecasts still indicate that global wheat and corn crops will exceed recent averages in the 2026/2027 season, keeping widespread supply concerns under control. However, the question is not the amount of grain the world produces, but rather the margin of error that the balances actually provide.

However, the question is not the amount of grain the world produces, but rather the margin of error that the balances actually provide. Production and consumption have grown in parallel over time, in tandem with increasing population, the livestock sector, and demand for biofuels.

But does production keep pace with consumption? For the 2026/2027 season, the situation looks different from a year ago. Supply margins have begun to shrink. For wheat, the 2025/2026 marketing season was exceptional, as production far exceeded consumption. This allowed for the rebuilding of global stocks, leading to lower prices

Initial forecasts for the 2026/2027 season paint a different picture. The USDA expects global wheat consumption to exceed production by 0.8%. This deficit is not alarming in itself, but it represents a significant shift from the 2025/2026 season, when production exceeded consumption by 2.3%, the largest surplus in 8 years. Corn faces a more difficult situation. In the 2025/2026 season, global corn production exceeded consumption by only 0.2%, but 2026/2027 production is expected to fall 1.8% short of demand, the largest deficit in 16 years.

This ratio holds even after excluding China, whose massive grain stocks often distort the global balance. Many of the world's largest wheat and corn exporters enjoyed exceptional crops last season, but consecutive record seasons are difficult to achieve.

Increasing production would be less worrying if rebuilding global grain supplies were simply a matter of planting larger areas. But grain planting decisions are influenced by multiple factors, including higher oilseed yields, rising fertilizer costs, unstable weather conditions, and changing crop economics.

The balance between these factors varies by region, but a common feature has emerged among many major grain exporters in the 2026/2027 season: shrinking grain planting areas, especially for wheat. In the United States, corn and soybeans have gained increasing popularity at the expense of wheat, leaving farmers in the 2026/2027 season with the smallest wheat planted area since data recording began in 1919, according to the USDA.

Similar trends appear elsewhere. Russia, the largest grain exporter, is expected to harvest its smallest wheat area in over a decade, while sunflower and rapeseed plantings have risen to record levels. Canada planted a record area of canola in the 2026/2027 season, while wheat plantings fell to their lowest in 4 years. The European Union has also shifted land from grains to oilseeds. Australia's wheat planting area is expected to fall to its lowest in 7 years in the 2026/2027 season due to severe drought conditions during the planting season.

These planting decisions are critical, as losses in planted area can quickly lead to production declines under adverse weather. This year's U.S. wheat crop illustrates this risk. Widespread drought in winter wheat growing areas has reduced the expected 2026/27 wheat production to its lowest in 56 years, with harvested area falling to its lowest in 149 years.

Higher prices may encourage increased production in subsequent marketing years, but many other factors—whether weather, competition with other crops, or farm economic challenges—mean that calculations may not be that simple. Local issues, global consequences. The shrinking production margin also changes how markets respond to regional disruptions.

When the margin of error in the global budget narrows, local weather problems can quickly become events impacting international markets. The French corn crop provides a recent example. Drought has led to a sharp decline in production forecasts, with output potentially falling to its lowest in 50 years this year.

Drought can lead to a sharp decline in production forecasts, with output potentially falling to its lowest in 50 years this year. Meanwhile, Europe has recently emerged as one of the largest destinations for U.S. corn exports, meaning that any production shortfall in France could affect trade flows beyond Europe itself. But not every supply disruption leads to a loss in production.

Ukraine proved this lesson after the 2022 Russia war. Grain exports faced severe restrictions for months, yet most of that production eventually reached global markets once alternative export routes emerged. It is worth remembering this distinction whenever export disruptions occur, including the current shipping disruptions affecting the movement of Russian grain across the Sea of Azov in the wake of the Ukraine war.

Economic Columnist at Reuters