The Pro Farmer crop tour finishes today, and the Canadian rail strike is on.

The grain trade is softer across the board this morning, as grain trade results yesterday look good from the crop tour along the Canadian Railways will have a strike, as last-ditch efforts for negotiations appear to be failing.

The Pro Farmer Crop Tour worked its way through Illinois and along Western Iowa yesterday, with their results showing the crop potential is there. Pod counts on soybeans are well above average, though heat and dryness in the upcoming forecast could limit some of them getting filled. On the corn side, yield expectations are above last year and above average. However, some feel the actual field data shows more variability than we should see when expecting a yield as high as the current USDA figure. Another private crop tour in Illinois confirmed similar findings, coming in well above last year, though not quite as stout compared to a year ago as what the USDA printed in their August report.

Canada’s two largest Railways account for 80% of the network shut down as labor negotiations appear to have failed. The lockout is expected to persist with no new talks scheduled and the Railways asking for the Canadian government to intervene in binding arbitration. This is against Prime Minister Trudeau’s party, which was propped up by the pro-labor New Democrat Party, which opposes government measures on behalf of employers against employees. It’s estimated that a 1-week rail close down will cost Canada more than $1 bill, with farmers having only 10 days of harvest storage available. The timing of the rail shutdown cannot have occurred at the absolute worst time: spring wheat, old, and canola harvest was starting. The duration of the strike could shift grain export demand to the US. Both Canadian Railways have US tracks, which will stay in operation and will not be affected by the Canadian shutdown.

In China, calls are growing louder from the country’s economists for new forms of stimulus. Last week, a group of economists was cited in a China Daily article calling for the Chinese government to provide $139 billion in consumer vouchers as one of the best ways to fix the economy. Another economist is pushing for direct to consumer stimulus, with another $260 million added to help term out debt for local governments, allowing them to return to a place where they can again invest in development.

The grain trade is now turning into a sideways play as demand is being built on the weakness of the US dollar, making new low pricing for the calendar year. Along with the ongoing dry weather in South America, planting is usually scheduled for September, and European and Black Sea heat and dry weather are on their crop finishes. After a three-day lift, soybeans are struggling today with the large IL and IA soybean pod counts from the crop tour. More Chinese demand is anticipated as a become a regular buyer daily.

The forecast for the Midwest has a dry and warming weather pattern for the next 5-6 days, with uncertain rainfall chances for the N Plains and the Lake States after that. Little to no rain is forecasted for the S and C Plains, the Delta, and S Midwest over the next 7-9 days. A rapid fall in soil moisture is pushing crop maturity, and a flash drought has developed in the S Midwest. Soybeans are in the reproductive stage there and at the biggest yield risk. The stress on Delta and second crop soybeans is building.

Live and feeder cattle prices closed mixed yesterday after new lows for the decline were achieved, and a bounce materialized off the lows into the settlement. The outlook for weaker cash trade and liquidation ahead of the August COF report has the October cattle futures at a 4-month low. Cash traded yesterday at $186 on a live basis in the north, which was $4 lower for the week, and dressed trade was down $3 at $295. Sales in the South were down $2 in Texas at $183, with the Kansas trade $1 lower at $1 84. There is likely more business today, but weaker cash trends have been set.

The NASS will release the August Cattle on Feed report Friday afternoon. Ahead of the report, the average trade estimates are coming in and call for a July Marketing rate of 108%, a Placement rate of 103%, and the August 1 Feedlot Inventory at 100% of last year. The placement rate could potentially be a bit higher, as cattle imports jumped 31,000 head.

The break in October cattle implies a technical journey down to the $170 range via measured move theory, and October feeder cattle have measurements to the low 220 range. Rallies can occur, but they are likely short-covering rallies that offer renewed selling interest.