US grain futures were mixed last night, corn was a smidge firmer nearby while a smidge weaker in the outer months. Soybeans were back a little, leading the oilseed markets lower with both ICE and Paris canola slipping away. Wheat futures found support, the rally countering the move higher in the AUD.

The world continues to watch the current drought in Europe and across central China. The dry spell is probably more likely to have an impact on winter crop sowing but there is an expected impact on yields for current crops. Corn yields are being affected in the far west of the US corn belt and most traders also expect to see some issues with grain fill in corn in Europe. The dry weather is generally south of the main corn regions in China and generally to the west of the major winter wheat area.
Water availability in China may become an issue as reserves are drawn down. Inflow rates at the Three Gorges Dam have reduced during August. On August 1st, the inflow was 13600m3/s, by the 24th the rate had declined to 9700m3/s. During the same time frame the water level has also fallen from 149.09m to 145.28m.
The media are calling the dry spell in Europe a 1/500-year event with 2/3rds of the region being affected by drought. A drought in the EU is not quite the same as a drought here though. A quick look at World Ag Weather and the 30day rainfall map reveals much of France and Germany saw falls of 15-30mm of rain for August. Much of Poland and central Europe has seen 75-100mm for the month. Spain is dry though. To call Europe in the grip of a 1/500-year drought might make a good headline in these climate sensitive times but when you look at the actuals the dry time they had a few years back had a much bigger impact on cereal production.