A lower start is expected in all pits this am, about 5 in wheat and corn, 15 in beans. The outside markets are sending mixed signals to the grains this am with crude oil and equities down, a negative influence, while the $ index is slightly lower, a supportive influence.

Two salient items are likely to influence the market this am: great weather, which helped drive prices down in corn and beans yesterday; and news China is finally going to start selling grain from its state-owned reserves. There have been many rumors over the last few months, including yesterday, that China was going to start selling some of its reserve stockpiles of grain. The Chinese government announced they will initially offer to sell 500,000 tonnes of beans starting next Thursday and 2 million tonnes of corn next Tuesday. They will also sell 750,000 tonnes of wheat and 700,000 tonnes of rice. This news had a negative impact on our grain prices. However, it would be more accurate to say the government is going to try to sell this grain as their prices might be too high to attract many buyers. For example, they will offer beans at $549 a tonne when crushers (processors) can import beans currently around $512 a tonne for Oct/Nov. This could keep sales very slow unless import prices rise or the government cuts its price. Still, the announcement China would at least offer to sell some of its grain reserves had a bearish impact on our grain market and could do so again this am.

Weekly export sales were in line for wheat at 422,000 tonnes. Corn was at the high end of trade ideas at 700,000 tonnes old crop and 468,000 tonnes new crop. Beans were better than expected at 134,000 tonnes old crop and 550,000 tonnes new crop. China bought 111,000 tonnes of the old crop sales and 525,000 tonnes of the new crop. Meal sales were 62,000 tonnes, well below trade ideas but oil sales were much higher than expected, 48,000 tonnes old crop and 42,000 tonnes new crop.

India's Meteorological Dep't is forecasting good, widespread monsoon rain the next 5 days. They reported rain in the week ended July 15 was 6% above normal but from June 1 to July 15 it remains 27% below normal. Weather in the main growing areas of China remains very good overall. Rain is still forecast in the dry Argentine wheat belt early next week but the driest part of the belt, western Buenos Aires province, will see the least amount of rain. Hot and dry weather continues stressing corn in parts of southern Russia and the Ukraine while temps are forecast to turn hot next week as well as dry in the spring wheat belt of Russia.

The US Delta will benefit from more scattered rain the next 2 days. Scattered rain will slow winter wheat harvesting in the southwest the next several days. The Midwest will continue to benefit from near ideal weather with scattered rain every few days and mild temps. The 6-10 day calls for more of the same. Despite very bullish outside markets yesterday, corn and bean prices sold off to a much lower close due to the ongoing very good weather pattern in the Midwest. As I said yesterday, Jul and Aug are the two critical weather months for these crops so this continued very favorable weather pattern should continue weighing on prices. ---Vic Lespinasse