Some Relief From the Excessive Heat, But Very LItte Rain in the Forecast

* Another big downtick in crop condition ratings expected. Last week’s oppressive heat across the Corn Belt took another bite out of crops, especially the corn crop which is pollinating in many areas. As a result, traders are anticipating another significant reduction in crop condition ratings this afternoon. This week’s forecast signals relief from the extreme heat, with seasonal temps forecast over much of the Corn Belt the next five days, although hotter temps may return by the weekend. But while temps are forecast to moderate, there’s very little precip in the outlook aside from scattered showers. The National Weather Service forecast for July 14-18 calls for above-normal temps and below-normal precip over virtually the entire Corn Belt. The long and short of it: Extreme moisture stress continues erode yield expectations, which is giving traders incentive to keep building weather premium into the market. * USDA’s July Supply & Demand Report out Wednesday. USDA will not issue a survey-based estimate of the corn and soybean crops until August. But that doesn’t mean the ag department won’t adjust its yield projection due to the excessive heat and dryness experienced across the bulk of the Corn Belt. A Dow Jones survey signals traders expect USDA to lower its corn yield projection to 154.1 bu. per acre from 166 bu. in the June Supply & Demand Report, while the average guess for the soybean yield is 42.3 bu. per acre compared with 43.9 bu. last month. The long and short of it: USDA’s June yield projections are too high given the adverse weather, but based on historical adjustments, USDA won’t trim its yield projections nearly as much as traders anticipate. * Chinese CPI, PPI indicate more monetary policy easing likely. China’s consumer price index (CPI) eased to 2.2% above year-ago in June, while the producer price index (PPI) dropped to 2.1% under year-ago last month. Food prices, which account for much of the inflation in China, rose 3.8% from year-ago last month although that’s much less than previous months. As a result, inflationary pressure is not seen as a concern. In fact, deflation is now the concern for China. The long and short of it: With inflation not a concern, the Chinese government has a reason to get more aggressive with its easing of monetary policy to combat its slowing economy.