Crop Ratings and Global Supply Concerns Lift Grain Markets

Lower than expected US weekly crop ratings and more reductions to European corn production sparked a solid “Turnaround Tuesday” bounce in corn with beans and wheat more muted but still higher. Russia is trying to find military or political ways to ensure safe grain passage though their many sea lanes that have been the targets of recent Ukrainian attacks, but exports from the Black Sea region continue to struggle adding more support to world prices. A decent daily corn sale, rising US basis, and a concerning forecast for a return of the heat in August added to today’s subdued strength despite another sharply lower day in crude prices on more negotiations between the US and Iran. The same factors lead the markets into the end of the week and month.

News and Notes:

• The blistering heat in the Plains and WCB will end soon with a cooler, but still dry outlook into early next week. Major model agreement started in the overnight runs for a return of the heat in early August with limited rain chances for the Corn Belt after this weekend. The US forecast is on the edge of causing the bulls and end users to reconsider their upward price targets if the first two weeks of August weather play out as advertised. European ag is in a state of emergency because of the drought with new private forecasts now have the European corn crop down 410 MBU (20%) from last year.
• The daily December corn chart is on Page 2 and shows the best daily string of closes over all major moving averages since early May. Yesterday’s test of and today’s bounce from the 100-DMA (blue line) is a good technical signal as is the RSI (bottom box) moving back into a neutral and not overbought reading. Further drops in crop ratings will allow for the bulls to target the $4.90-$5.00 area for the next rally target. The cluster of moving averages from $4.61-$4.74 will add solid support if the bears try to further test the downside.
• The weekly crop conditions fell more than expected and in our updated yield models we are thinking yield is 178.6 BPA for corn and 51.9 for beans. The bean yield estimate is too early for any reliability, but the corn yield estimate is falling in line with other models as the crop is through pollination. If August remains as imperfect as July has been, it is hard to see corn yield improving and ending over 178-179 with beans potentially falling under 51. A good comparison is 2024 when the late July corn ratings were almost identical and that years final yield was 179.3.
• The cattle market rebounded modestly today as the overreaction to the one border opening location took feeders too far. With that entry location only expected to allow 4000 head per day to enter and the  uncertainty on timing when the other potential three sites may open, this is not an event worth $7 on the price of nearby feeders. One case of positive screwworm will stop any progress on the reopening.
• Please listen to the latest FieldLink podcast discussing mid-season applications to improve yield potential and a market review of the July crop report and all the events moving the markets.
• The USDA announced a modest 9 MBU corn sale to unknown in today’s report as the daily activity becomes more routine as we approach harvest. For every day that China is not mentioned, the daily average for their purchases to reach the 25 MMTs increases. Once harvest starts and the trade meeting in Washington nears, China will need to start buying 30 MBU a week to hit the goal.

With yield models beginning to focus on the late July crop ratings and a lack of meaningful moisture relief in sight for the driest areas of the WCB, it is becoming safer to say that the upside potential of the corn crop is limited while the downside risk could potentially be another 2-3 BPA with a poor end to the season. Despite crude oil’s sharp fall on another temporary cease fire between Iran and the US, the crude market is no longer the biggest driver of corn and bean price as seen by today’s continued collapse in crude and rally in corn on fear of an even tighter US and world corn balance sheet. High gas prices would support corn, but they are no longer mandatory. It has long been speculated why China was not also buying US corn in the trade deal, but they may be making more backdoor purchases that count just as much when we find out where they are being delivered. Chinese demand, US weather and any further shipping problems caused by the Russia/Ukraine war are the lead stories as we close out July.