US grain futures were sharply higher in overnight trade, technical Tuesday, a dead cat bounce, we’ve found a bottom, who knows. This market is very volatile, and 24 hours is a long time for a grain speculator these days.
According to this morning’s wires the crux of the rally is the rapid decline in US crop condition ratings. Something I outlined in the corn rating chart and analysis sent out late yesterday. World Ag Weather, and several other mid-term models, are now calling for a return to blistering heat across the US Midwest over the next 7 – 14 days. Temperatures again climbing into the mid to high 30’s and beyond as far north of S.Dakota and Iowa before the end of the first week in August. Combine this with a relatively dry outlook for Nebraska and S.Dakota and you are likely to see many more acres of burnt up corn reducing US average yields this year. Further south, across the cotton and main soybean states, temperatures will be very hot, but they do have a better outlook for rain.
Very hot conditions will persist across Russia and Ukraine, aiding in the harvest of wheat. Yields in Russia have been very good, many regions posting record yields. Further west in Europe, temperatures will remain high, but not excessively higher than the average for this time of year. Rainfall though is scarce, much of France not expected to see any precipitation over the next 7 days. This should result in a similar rate of decline in spring sown crop ratings for much of Europe in the coming week as we have seen in US crops over the last two weeks.
Slow soybean exports out of Argentina and Brazil may be one of the few things (other than palm oil) slowing down a much sharper rally in Chicago soybeans. The Argentine government is even looking at delinking agricultural export income from the “domestic peso”, as crazy as that sounds.
Wheat futures were higher, dragged higher by the US row crops and doubt that Ukraine wheat will make it out of the Black Sea in volume.