Rallying to new highs this week, wheat prices have continued to rally on drought concerns in the former Soviet Union (FSU) countries of Russia, Ukraine, and Kazakhstan. That is in spite of a lower corn market, with a potential 'head-and-shoulders' top in corn that is giving different signals to traders than the wheat market.

Wheat is becoming a 'lone ranger' in the bull market for grains, running to new highs while soybeans are still wavering near their old recent highs around $9.87, basis November futures.  What can be causing so much of a different response to these markets where wheat can continue to rally and be on fire, while corn and soybeans stay more subdued?

For one, the drought in the FSU is real, with extremely warm temperatures occurring since July, and the intensity of the heat getting stronger as we move into the forecast period of August.  The heat is simply continuing to shrink the Russian, Ukraine, and Kazakhstan harvest that will continue to trim supplies of wheat in the world. 

That is good news for the US, as we have more than 1 billion bushels of carryout still projected even in the July report. In that July report,  the USDA already started trimming the major exporters supplies with the 4 mmt cut in the Canadian crop.  Those cuts in world wheat supplies will likely continue in the August report, even in spite of what might be another hike in the US wheat crop yield.  Winter wheat crops in the US were outstanding, and it looks like the spring wheat crop will also be another bumper based on this week's HRS wheat crop tour's first few days of surveys.

While wheat problems continue across the world, the corn and soybean crop in the US continues to get plentiful rain (too much in many areas) and moderate temps that continue to allow the crop to get better.  Our Pro Ag yield models suggest that corn crops have been improving for the past 3 weeks along with soybean crops.  Soybeans now have the largest yield estimate of the year, and it is likely the crop will continue to improve as we move through July and into August. So far, there is no sign of the high pressure ridge.