Limit Up

I can’t believe we have already flipped the calendar to August. July was here and gone in the blink of an eye, but it sure brought its fair share of volatility to the markets. While July was one of the most important months for corn, August is crucial for soybeans. The market is glued to every weather map and forecast, drought monitors and USDA updates as we trudge through the season of crop development.

Corn managed to lead the rally early in the week as traders stepped back into the market after several sessions of selling. A combination of solid export demand and lingering questions about crop conditions helped futures recover some lost ground. The latest USDA Crop Progress report showed corn ratings slipping from the previous week as pockets of heat and uneven rainfall took a toll across parts of the Corn Belt. While the crop remains in generally good shape nationally, traders know August weather often determines whether a good crop becomes a record crop, or simply an average one. With USDA’s all-important August Crop Production and WASDE reports just around the corner, many market participants appear reluctant to make aggressive bets until more survey-based yield data become available.

Kansas City wheat also found support to begin the week. Much of the winter wheat harvest is winding down, shifting the market’s attention away from combines and back toward global supply concerns. Continued geopolitical uncertainty surrounding Black Sea exports has added a layer of risk premium to wheat prices, while spring wheat conditions have generally remained favorable. Even so, the wheat market remains highly sensitive to world production estimates, export competition and currency movements. For producers who have already filled the bins, rallies continue to present opportunities to review marketing plans rather than assume higher prices are guaranteed.

Soybeans continue to be the weather market’s biggest wildcard. Like corn, soybean futures have spent much of the past couple of weeks under pressure as traders anticipate the possibility of another large U.S. crop. However, soybean development is entering a critical stage, and August weather has historically carried enormous influence over final yields. While scattered rains have eased stress in some regions, other areas remain hungry for moisture. Export demand, particularly from China, will also remain a key storyline heading into harvest season. If weather stays mostly favorable, the market could continue wrestling with expectations of burdensome supplies. But any meaningful weather scare could quickly shift sentiment.

Outside of grain, livestock markets have been relatively steady. Cattle futures continue to receive support from historically tight beef supplies, although higher boxed beef prices and consumer demand will remain important factors as summer grilling season begins to wind down. Lean hog futures have experienced more mixed trade, balancing adequate supplies with uncertainty surrounding domestic demand and export business.

Energy markets have added another wrinkle to agriculture. Crude oil prices have recently softened as geopolitical tensions eased somewhat, providing modest relief to fuel markets. Lower energy prices can influence everything from farm diesel costs to ethanol demand, making the energy complex worth watching alongside grain prices. Staying disciplined with marketing decisions (and avoiding emotional reactions to every forecast update) may prove just as valuable as the rain itself.