China Trade Breakthrough and Weather Stress Ignite Explosive Grain Rally

Exceptional gains on the heels of a breakthrough at last Thursday’s trade meeting with China, too much recent rain in several parts of the Corn Belt and the outlook for the return of extreme heat into the end of July sparked heavy fund and end user buying as the fear of last week’s acreage report has disappeared. With pollination starting in earnest this week for the central Corn Belt, the crop is in less than perfect shape and under far more stress than the 2025 crops which combined with a quick escalation of Chinese demand has all market participants recalculating strategy heading into the rest of the growing season.

News and Notes:

• As pollination accelerates this week, the Corn Belt is a mixed bag with the ECB and southern NCB suffering from too much water, while the WCB is in generally good shape, for now. Above average temperatures were consistently mentioned in the major forecast models for the S Plains and WCB for mid-July which will be closely watched if the heat dome from late June returns and moves east. European crops continue to bake as more seasonal temperatures are not offsetting the lack of rain. European 2026 summer crops are on course to be the worst in decades. India’s monsoon also remains disappointing which figures into world balance sheets if both Europe and India turn from net exporters to net importers later this year. Current world yield estimates have world corn and wheat production falling nearly 4 BBU from last year. That is a serious number.
• The daily Dec corn chart is on Page 2 and shows today’s sharp gains, which is also the largest daily gains for life of the December 2026 contract. Although the post-report rally has not even reclaimed half of the losses since the contract high ($5.06 ½) on May 13th, the four-day rally (with one down day) has added back almost 35-cents. Today’s definitive close over the 20-DMA (red line) sets the next overhead technical targets at the cluster of MA resistance from $4.67-$4.73. The funds were modestly short going into the week, so they have plenty of ammunition to invest in the corn market. The market is not quite overbought at 55 on the Relative Strength Index (RSI – bottom box green line), but moving over 60 would get my attention on a possible slowing to this big move.
• The US and China were surprisingly quiet about last Thursday’s trade meeting going into negotiations, but both sides were able to move forward and compromise on several critical issues, including the US dropping the 10% fentanyl tariff in exchange for China dropping their 10% tariff on US soy and grain imports. The bulls have been waiting for China to drop their 10% import tariff since the end of the May trade meeting, but as nothing happened in the weeks after the apparent deal, frustration on China’s inaction was evident in the sharp break in June. With the groundwork now set for US balance sheet shifting export expansion, the barriers of fear of the USDA acreage report and China not adhering to the trade deal have mostly disappeared.
• Adding to today’s bullish enthusiasm is the expectation for another week of crop rating declines in both corn and beans. The 2026 weather has been far more inconsistent than in the 2025 growing season and the loss of crop health is taking out the risk of yields above 185 BPA with more private analysts cutting their expectations to the 180-181 range. A US yield of 179 or less would start a much more meaningful rally. In Tuesday’s comment , we will update our own estimates.
• Energy related news had OPEC+ announcing increased production now that the Straits are re-opened. Crude oil has easily traded back to $67-$68 with diesel futures prices are comfortably trading between $3.10 - $3.30 a gallon. Continue to top off your tanks once your supplier prices get in line with current market conditions and levels.

Is this a weather market or a demand market? There are legitimate arguments on both sides, but it has been a long time (late 2020 and 2021) where the markets had to price in surging demand and weather issues at the same time. After the gut-wrenching losses in late May and June, the fear of another disastrous year of profitability are somewhat fading, but Dec corn making another charge to $5 and Nov beans accelerating past the old contract high of $12.14 now seem very possible if today’s headlines become reality.