Weather and Straits Optimism Trigger Sharp Grain Selloff

After a quietly higher overnight session, the morning news from Washington that a deal to reopen the Straits may be in place as soon as Thursday and a cooler/wetter US forecast crushed the markets with crude falling sharply and an avalanche of selling developed in the soy and grain markets while the US equity markets soared to new all-time highs in two of the three major indexes. Crude oil was $7 lower than the overnight high, but some lunchtime stability kept the grain and soy losses more reasonable. The market is being forced to trade each reopening headline, but the failure of the last several temporary deals makes every trader and associated market skeptical if it will happen. Headline and weather-based volatility remains intact.

News and Notes:

• Today’s US forecast updates were another bearish influence on trade with rain currently falling across E Iowa and N Illinois and more expected in the 10-day forecast. Some of the extreme heat from Monday’s forecasts has been removed which means bean yields over most of the Corn Belt continue to have trend+ potential. Europe’s drought has intensified and is moving further east to stress what decent crop was left.  
• The November daily bean chart is in Page 2 and shows today’s reversal of Monday’s gains from the unchanged crop ratings and the sharp reversal in crude oil which triggered a strong sell off in bean oil. The 50-DMA (green line) that provided support for Monday’s reversal, acted again as support after a mid-morning break through the 50 and to the 100-DMA (blue) before an after-lunch bounce. The market is becoming modestly oversold after the 8-session 87-cent break. A sustained buying spree by China and the continuation of strong bean oil demand are key for a return to $12+ futures.
• Weekly crop conditions were lower than pre-report expectations with corn falling 2% to 61% G/E while beans were unchanged across every rating category at 63% G/E. The ratings continue to tell the tell of an inconsistent weather year across the Corn Belt with IL ratings showing slight improvement but still well below average and levels for them to make expected state yields while NE (and the rest of the WCB) are struggling. IA remains the stalwart with the best corn (80%) and bean ratings (78%) of any major producing state. Last weekends rains should at least stabilize next week’s ratings while beans ratings could rise 1-2%. With harvest starting in the southern states, the crop ratings begin to be more reflective of the actual yields, than just a subjective windshield survey.
• Treasury Sec Bessent expressed optimism that ongoing talks with Iran will open the Straits for free transit. Those comments reversed overnight crude oil gains by $4 with diesel reversing over 18-cents a gallon. Sep diesel futures pulled back under $3.75 a gallon toward the lower part of the current range. Any pullback of another 15-20-cents a gallon in Sep futures should be used to buy the equivalent priced diesel from your supplier to top off your tanks as harvest preparation begins.
• China was confirmed as a buyer of another 2 cargoes of beans in this morning’s daily sales report, but the totals remain light of the trend needed to reach their goal by year end. China is has purchased 14% of the committed amount from the trade fact sheet the White House put out in November. Preparations for the trade meeting in late September are ongoing. Any disruption or delay to the meeting will not be met well by the markets.
• The private weather-based yield estimate from AgProphet came out today at 186.3, which is hopefully the highest estimate we see this week. The overall weather inconsistency though all sections of the Corn Belt have tempered yields other modeling.

Today is a harsh reminder of how quickly a supportive day of trade and developing bullish news can vanish in an interview and a forecast change. Extreme volatility is the new normal as the massive influence of the current 24-hour news cycle and massive speculative money flows have each day. Tomorrow could be a complete reversal, but as each rain event hits key US growing areas, the chances of some of the lowest yield concerns fade. None of the key things that we have been watching will change before the USDA August 12th report which will again add another cross-current in the whirlpool of market moving news Private yield estimates and any truth to Straits reopening will be on the menu for the rest of the week.