The market is toying with the hopes of an Iran/US MOU that could get signed this weekend in Geneva.

Grain futures came under light pressure overnight as improving geopolitical sentiment combined with beneficial rainfall across portions of the Corn Belt. Energy markets led the weakness, with crude oil falling by more than $3.50 per barrel after President Trump said a formal agreement with Iran could be finalized as early as this weekend. According to Trump, such an agreement would pave the way for the reopening of the Strait of Hormuz.

Traders remain skeptical, however, as similar announcements have surfaced before only to unravel later. There is also considerable disagreement regarding control of the waterway, with the United States asserting it will oversee shipping access while Iran continues to reject that position. Even if the Strait reopens, market participants recognize that global energy logistics will not return to normal overnight. A key unknown is how quickly shipping companies will be willing to resume operations in the region and consider transit back in after weeks of heightened tensions.

The June WASDE report produced few major surprises, but several adjustments drew attention. Most notable was the USDA's decision to lower corn used for ethanol by 25 million bushels while raising exports by an equal amount. Given strong ethanol margins and current production rates, the reduction in ethanol demand appears difficult to justify. Export projections also remain conservative, as cumulative sales are already within roughly 2 million metric tons of the USDA's target with an entire quarter remaining in the marketing year.

The market also appears to be overlooking the steady tightening of global corn supplies. World ending stocks have declined by nearly 40 million metric tons over the past several years, a trend that continues to support the longer-term outlook. Soybean and wheat estimates were largely unchanged, although wheat received a modest boost from an 18 million bushel reduction in US production tied to drought conditions across portions of the Plains. Of interest, Russian wheat values have not only held steady over the past week but are also showing week-over-week gains. This, while US values and French milling wheat have declined. Hot, dry temperatures locked in over Siberia are calling spring wheat production into question, given recent high expectations.

French and Spanish wheat, along with the French corn crop, are struggling. Forecasts have been hot and dry, and now, after a recent cooling, extreme heat over the weekend looks to return for an extended period in June. This below-normal rainfall forecast will add stress to the late-ripening wheat and the developing corn. Europe has entered what could be called a severe drought, so Western European weather forecasts in the coming weeks could lead to interesting price developments.

Today’s Friday closes for corn would be a bit friendly if support can be proven with settlements above 412 for July corn and above 440 on December corn. November beans settling above 1134, a price that has held on a closing basis every day this week, would also be an interesting technical observation, indicating that stability was found early this week in the grains and row crop pricing.