Grain prices firmed overnight as corn and soybeans continued to hold their early week lows on a closing basis, bringing some buying interest back into the market. Wheat also found renewed buying after challenging the early July breakout highs.

France continues to provide a supportive backdrop for corn. Their corn crop is now expected to be the smallest in 47 years, falling 35% to just 9 MMTs. This week’s crop report lowered good/excellent ratings another 3% to just 31%, while 42% of the crop is now rated poor/very poor. France also trimmed its wheat production estimate slightly to 31.9 MMTs.

The shrinking European corn crop is becoming increasingly important to the US balance sheet. USDA will eventually have to account for lower world corn supplies, along with the likelihood that the US captures some additional European demand. Both could ultimately work toward lowering the US new crop carryout. Nov Euronext corn this morning is trading up 3.00 MMT, at 249.50, near the highs of the week.

Attention is quickly shifting toward Wednesday’s NASS report. Trade estimates for US corn yield range from 180.5 to 184.8 BPA, with the average at 182.4. Soybean estimates range from 52.0 to 53.5 BPA, averaging 52.9.

One interesting piece of history surrounding the August report is that USDA corn yield adjustments are typically meaningful, often moving at least 1 BPA from the previous estimate. That becomes particularly interesting this year with national corn conditions sitting near 61%, among the lowest ratings of the past 15 years and more than 10 percentage points below last year. That makes it increasingly difficult to justify raising the national yield in August. Crop conditions will need to improve over the coming weeks if USDA is eventually going to make the case for a larger yield.

The other major discussion surrounding Wednesday’s report is acreage. Updated FSA information will begin working its way into USDA’s numbers, and there is some thought that corn and soybean acreage could edge higher. Last year produced an unusually large increase of more than 3 million acres as the season progressed, but assuming something similar happens again this year may be a mistake.

High fertilizer and input costs created planting challenges across portions of the South earlier this spring. Because of that, I am not convinced corn acreage increases at all, and there remains a possibility it actually declines. Combine potentially fewer acres with weak national crop ratings and growing European import needs, and the statistical direction of new crop corn carryout appears to be moving lower rather than higher.

Outside markets are providing another tailwind this morning. Stock indexes and metals are sharply higher following the monthly employment report, which showed nonfarm payrolls declining by 23,000 compared with expectations for an increase of 83,000. Unemployment stands at 4.1%.

The weak employment number has markets increasingly looking toward the possibility of an interest rate cut before year end, while additional rate increases appear increasingly unlikely. The US dollar is down 0.48 this morning at 99.32, another supportive influence for commodity prices.

Meanwhile, global weather risks are not going away. The United Nations is warning of growing risks to global food supplies as El Niño strengthens and threatens additional crop losses. At the same time, continued fighting around the Black Sea remains a threat to one of the world’s most important grain producing and exporting regions.

Here at home, rainfall continues to favor the central and eastern Midwest while repeatedly missing portions of the Plains. That difference matters more as the crop moves deeper into grain fill.

Stress degree days continue accumulating across important western production areas, including eastern North Dakota, South Dakota, Nebraska and Kansas. Those states may not receive the attention that Iowa, Illinois and Indiana do, but collectively they produce enough corn that declining yield potential in the West can pull down the national average.

That may be the biggest source of complacency in this market right now. Producers and traders looking at strong crops across eastern Iowa, Illinois and Indiana naturally assume the crop must look similar everywhere else, but it doesn’t.

Yesterday’s NOAA drought map continues to highlight the areas struggling with moisture. With grain fill still ahead and stress building across portions of the western Corn Belt and Plains, sustaining a national corn yield much above 180 BPA could become increasingly difficult.

The market has spent much of the summer trading the crop it sees in the East. The August report may begin forcing it to pay more attention to what is happening in the West.