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.