The grain markets are finding themselves at an interesting crossroads as we head into the heart of July. After last week’s USDA reports gave traders plenty to digest, the market’s attention has quickly shifted back to weather, global politics, and export demand. As is often the case this time of year, Mother Nature is once again in the driver’s seat.
Corn has managed to hold together surprisingly well despite generally favorable crop conditions across much of the Corn Belt. Warm temperatures over the past couple of weeks have allowed many late-planted fields to catch up developmentally, with pollination now underway or just beginning across many key production states. Recent rainfall has been beneficial for much of the Midwest, although it has been far from evenly distributed. Some areas of Illinois, Iowa, and Minnesota have received excessive moisture, while parts of eastern Nebraska, South Dakota, Indiana, and Ohio are beginning to watch soil moisture more closely as the crop enters its most critical growth stage. Overall, crop ratings are expected to remain steady or improve slightly across much of the Corn Belt, although producers in drier pockets will be hoping the forecast verifies with additional rainfall.
Weather forecasts continue to lean mostly friendly for production. While much of the Midwest experienced heat and relatively dry conditions early this week, forecast models are showing cooler temperatures and more widespread precipitation developing over the next one to two weeks. If those rains materialize, they’ll likely keep a lid on any weather premium trying to build into corn prices.
Even so, demand remains a bright spot. USDA reported another sale of new-crop soybeans to China this week, and export inspections continue to run ahead of the pace needed to meet USDA’s current projections for both corn and soybeans. Many analysts continue to question why USDA didn’t raise corn export estimates further in last week’s WASDE report given the impressive shipment pace.
Soybeans have quietly been one of the stronger performers lately. Fund managers continue adding to long positions, and steady export business with China has helped keep buyers engaged. The combination of solid demand and a crop that still has much of its yield potential ahead means soybean traders will remain highly sensitive to every weather forecast over the next month. August weather will ultimately determine just how much production potential this crop can realize.
Kansas City wheat has been a bit more volatile, with world events providing much of the recent direction. Last week’s rally was fueled by escalating tensions in the Black Sea after renewed Ukrainian drone attacks disrupted shipping near the Kerch Strait. Although grain exports haven’t yet seen major interruptions, uncertainty surrounding vessel traffic and additional Russian attacks on Ukrainian port infrastructure have reminded traders how quickly geopolitical risk can influence wheat prices. Meanwhile, updated estimates suggest Ukraine’s wheat crop may be slightly larger than previously expected, somewhat offsetting concerns over export logistics.
Outside the grain markets, crude oil has pushed higher following renewed geopolitical developments in the Middle East. Rising energy prices continue to support biofuel demand while also raising concerns about inflation heading into another round of economic data releases.
Looking ahead, the next several weeks could prove pivotal. Pollination is beginning across much of the Corn Belt, soybeans are entering a critical stretch of vegetative growth, and wheat traders remain focused on developments overseas. Forecasts currently suggest enough rainfall to keep crop prospects generally favorable, but July weather has a habit of changing quickly.
