Wheat grabbed the spotlight in Chicago once again. Given crop problems in Europe, where rains are preventing farmers from harvesting wheat, and in Canada, where sizzling temperatures are expected to cut yields, wheat put in another stellar performance in the week ended August 3.
    Traders continue to eye the all-time high of $7.50 per bushel in Chicago wheat notched in a freak “squeeze” of a big commercial firm caught short 11 years ago.
    This rally looks to have stronger legs: outlooks for a 30-year low in global stocks and smaller yields due to harsh weather in key breadbasket growing areas.
    That outlook for scarcer supplies of a worldwide food staple has had a very real effect on demand. One need look no further that U.S. export sales the past two weeks: nearly four million metric tons were booked by foreign buyers.
    “The world flour user doesn’t have enough wheat ownership on. You sold 13 percent of your export sales in the last two weeks,” said analyst Roy Huckabay at The Linn Group.
    USDA is now forecasting 2007/08 U.S. wheat export sales at 28.58 million tons, up 15 percent from the year before.
    Corn and soybeans seem to be following wheat, trying to keep pace since they will be prone to lose acres next year if historic high prices for wheat attract farmers to plant a lot more wheat this fall in the southern Plains and Midwest.
    Both row crops are also reacting to changing Midwest weather forecasts, especially soybeans which are in their critical yield determining phase of pod-setting and filling.
    Traders will be watching to see if good rains move through over the weekend. If so, that will be bearish for Chicago grains and soy when screen trade opens Sunday night.
    On the other hand, bulls were watching a high pressure ridge they expected to edge its way into the Corn Belt late next week and turn conditions hot and dry. But good rains preceding the hot weather could mitigate that heat stress.
    Also seeping into the market the past week were spillover jitters linked to the credit market crunch and troubles in the subprime mortgage sector that kept some big speculators on the sidelines to conserve cash or meet margin calls elsewhere.
    “Normally you get a flow of capital into the markets for the new month and that doesn’t seem to be happening today,” said Charlie Sernatinger, analyst for Fortis Clearing Americas, said on Thursday Aug 1 as corn and soybeans closed lower.
    “It feels on the floor like hedge funds are taking risk off the table, not putting any new money into it,” he said.
    Bottom line: the same fundamental variables that drove prices in late July will continue into early August — European, Canadian and Midwest weather; export demand for U.S. crops; and general market jitters about subprime fallout.
    Next week the big numbers everyone will be watching will be the U.S. Agriculture Department’s corn and soybean yield estimates due on August 10.
    The August estimate is the first for the new crops based on actual field surveys, rather than historic yield trends.
    So yield predictions especially for corn are taken more seriously by veteran grain traders than the trend-line yield projections USDA has been using up until now.
    So far, there seems to be a general feeling that the heat and dryness this summer is shrinking the corn and soy crops from current projections. But a record U.S. corn crop is still in the cards given the 63-year high in spring plantings.
    For the weekly crop conditions due on August 6, traders expect USDA to cut its rating of the U.S. corn crop by 3-5 percentage points in the good to excellent categories and soybeans by 2-3 points due to heat and dryness the past week.