All eyes were on the wheat market this week with prices soaring to an 11-year high above $6.70 per bushel — and eyeing the all-time of $7.50.
    On Thursday weekly U.S. wheat export sales of 2.1 million metric tons –  another 11-year high — was one catalyst for the rally. But just as bullish were worries about both heavy rains and scorching European weather shrinking the crop there.
    U.S. traders will stay focused on Europe’s weather next week. Rains in France and Germany have been threatening harvest quality and quantity, driving flour miller to book U.S. wheat.
    But in North America, especially Canada, there are also fears that summer heat is now shrinking spring wheat yields.
    The corn market also got a boost from worry about a smaller feed-grain crop in eastern Europe due to the extreme heat.
    “We’re seeing interest in U.S. sorghum from the Europeans. They feed a lot of wheat over there, so if we don’t have feed demand for wheat, they look for non-GMO crops like U.S. sorghum or Brazilian corn. Both those markets are seeing good interest, with basis levels improving,” said Dan Basse, president of AgResource Co. in Chicago.
    But U.S. weather overall was bearish for corn and soybean prices this week. Heavy rains moved through the Midwest, which was seen especially beneficial for soybeans now in the midst of pod setting and filling. Chicago soy prices fell to levels not seen since before the bullish June 29 USDA planting report that showed U.S. soy acreage the lowest in 12 years.
    Extended forecasts looked a little warmer for next week across the Corn Belt, which might lend some support. As usual during the summer, any change in the Midwest forecast can spur volatility.
    Despite Corn Belt rains this week, Chicago traders expected USDA to lower corn ratings in its weekly crop progress report on Monday afternoon. Soybean ratings could be steady or possibly lower, they said.

The week of July 16 began with a bang — as in a bubble popping. Chicago corn and soybeans dove down the daily trading limits on Monday — 50 cents a bushel in beans and 20 cents in corn. They stayed there all week. A change in the forecast for the week to cool and wet from hot and dry fed the collapse.
    “Rain makes grain” and “Don’t stand in front of a freight train” — those old market sayings explain the sell-off.
    Weather is sure to keep the markets volatile in the week starting July 23, but with the focus shifting to soybeans from corn. July is the key growth period in the Midwest for corn yields, as mild weather during pollination assures a good “fill” for the kernel. For later-planted soybeans, though, the same mild temperatures and timely rains are needed in August to assure that flowering and pod-filling go well.
    “Corn seems to have gotten the rain it needs for now, but the beans need the rain in next week or two,” said analyst Gavin Maguire at Iowa Grain.
    On Friday, traders were hesitant to go home with a long position in corn or soybeans given what happen last weekend — even though on Friday next week’s forecast was hotter and drier than it was earlier in the week. No doubt weather forecasts will continue to drive the Chicago soybean and corn markets.
    But options trading on Friday featured traders actively selling $3.40 Dec 08 corn calls, indicating many in the market felt the corn crop is “made,” one options floor trader said.
    Roughly eighty percent of the Midwest Corn Belt saw 0.75 inch to 2.5 inches of rain in the week ended July 20.
    Traders are expecting the USDA to report on Monday that corn and soybean conditions improved a couple of percentage points in the good to excellent category after the rains.
    Conditions had been a downtrend the prior two weeks due the dryness, especially in the western Midwest. But as of July 15, two-thirds of U.S. corn was already rated good-to-excellent.
    The weather is still a factor for the U.S. spring wheat crop, which will be harvested in a couple of months. But demand, as much as this year’s reduced world wheat supplies, was the story that drove Chicago wheat to fresh 11-year highs.
    The export market is red hot for U.S. wheat, the traditional top shipper of wheat to world markets. Egypt, Morocco, Tunisia, and Bangladesh all booked more U.S. wheat this week.
    A rarity: the strength in wheat pushed the price gap between wheat and corn, basis December Chicago futures, to more than $3 per bushel on Thursday — a premium for wheat not seen in at least 30 years.
    Analysts on Friday refused to guess whether the spread has topped out, given current fundamentals: a 30-year low in global wheat stocks at a time when U.S. corn farmers are likely to harvest a record crop off the largest planted acreage in half a century.
    What remains certain is more volatility in the spread.

Chicago corn, wheat and soybean markets finished higher on the week. While aberrations in the U.S. Midwest forecast sparked price hikes or dips — long-term outlooks for grain supplies and soybeans to shrink added to the buying sentiment.
    Soybeans made contract highs every day this week. The market is on a roll after the USDA June 29 acreage report estimated that U.S. farmers planted the smallest number of soy acres since 1995. Corn also trended higher this week, tracking the moves in soybeans.
    Signs of demand for wheat from customers around the world helped wheat also end the week higher. Wheat is near 11-year highs on supply problems and world demand. USDA reported that U.S. exporters sold 1.2 million metric tons of wheat in the last week with fresh interest from Brazil, Iraq and Egypt.
    The same inputs especially weather will drive prices next week. Trading could get volatile on any signs of a high pressure ridge hanging out in the western Midwest as that would turn up the heat and keep things dry as corn pollinates and soybean approach pod formation, the two key growth stages.
    Traders already expect USDA to cut the condition rating of the U.S. soybean crop by 1-3 points in Monday’s update.
    The National Oilseed Processors Association will issue its June crushing demand data next week at around 137 million bushels, down from 143 million crushed in May. It’s common to see a drop during the summer as crushers close plants for maintenance ahead of the fall harvest.
    As expected, weekly trade data released by the Commodity Futures Trading Commission on Friday afternoon showed large speculators expanded their net long positions in all CBOT ag markets as July 10. The biggest jump was in soybeans — up 13,200 lots to 119,000.
    But the most momentous day for CBOT traders in Chicago this week came on Monday. Chicago Board of Trade and Chicago Mercantile Exchange members/traders voted to merge, with the Merc buying the CBOT for $12 billion. It was finalized on Thursday which marked the end — in name at least — of the 159-year-old Chicago Board of Trade.
    The CME Group, representing the marriage, opened for business on Friday with the ringing of the opening bell for the Chicago grains markets. There wasn’t a dry eye in the house.

Chicago grain and soy futures continued to react to the shockingly big U.S. corn acreage figure and the cut in soybean plantings estimate that the government released on June 29. Corn rebounded during the week, getting a lift from worries that a hot weekend in the Midwest could stress the corn crop as it enters pollination.
Up until this weekend the summer growing season has been pretty mild. Even though there hasn’t been much rain the last few weeks, temperatures have been cool — limiting crop stress. Ohio and Minnesota are the driest spots.
Traders and analysts expect few, if any, changes to corn and soybean ratings in USDA’s weekly crop report that will be issued Monday afternoon. However, there are concerns that spring wheat ratings could fall after a hot spell in northern Plains.
Weather will be the key price driver this week, with corn the most vulnerable to hot, dry conditions. If corn gets a boost this week on weather jitters, soybeans will likely follow as the market is trying to encourage South American farmers to plant lots of beans.
The other market factor will be the July 12 USDA monthly crop report. The general consensus among analysts and traders is the agency will boost its 2007 U.S. corn production figure and cut its soybean crop estimate to reflect the June 29 acreage report.
USDA will also issue a U.S. wheat production figure. A closely watched analytical firm Informa Economics came out with its winter wheat production estimate on Friday which was lower than the USDA June forecast. The hard red winter wheat crop is seen shrinking as Oklahoma and Texas wheat keeps getting hit with rain. Wheat has been hovering at an 11-year high for over a week, supported by supply worries. But the market broke down technically last Friday and appears to be range-bound for now, analysts said.
Weekly trader data issued by the Commodity Futures Trading Commission, usually released on Friday afternoon, was delayed until Monday due to the Fourth of July holiday. The most obvious change is an expected jump in the net long speculative positions within the soy complex after last week’s buying spree sparked by USDA’s low soy acre estimate.
While veteran Chicago Board of Trade traders have been in the midst of a summer weather market, they’ve also been consumed with a bidding war between the Chicago Mercantile Exchange and IntercontinentalExchange for their exchange.
Up until Friday they were torn between the two bids. But the CME on Friday sweetened its bid to $11 billion for the world’s oldest futures exchange, swaying many trader/shareholders to vote for the CME deal on Monday. If the deal passes — combining the two largest U.S. futures exchanges — the CME would become the world’s top futures/options mart.

Photo: A soft red winter wheat field in Naperville, Illinois, 30 miles west of Chicago, where farmers chose to grow wheat — a hot cash crop — ringed by “McMansions.” Picture taken by Peter Bohan in Chicago on June 24, about a week away from harvest.