The grain trade is firm this morning after drifting overnight with Pres. Trump made comments in his speech about the Chinese government getting possession of US voter files with names, addresses, and other important data. This created some moderate price softening overnight, which has now given way to new buying interest heading into the weekend as tensions in the Black Sea make headlines again.

Overnight, there was another Russian strike that hit Ukraine’s Mykolaiv port, damaging port infrastructure and three foreign-flagged commercial vessels. Although no additional damage was reported at Russian export terminals, shipping through the Sea of Azov continues to face major disruptions. Every additional attack increases freight costs, raises insurance premiums, and increases the likelihood that importers will begin sourcing grain elsewhere.

The reaction in wheat this week, culminating in Thursday night’s strength, may have been more important than the headlines themselves. Wheat repeatedly refused to follow corn and crude oil lower, despite having every reason to weaken. That kind of relative strength often signals the trade is beginning to price in a developing supply problem rather than simply reacting to outside markets.

The concern is not today’s shipment, but what happens over the next several months. August through December is when Russia and Ukraine normally dominate world wheat exports, moving roughly 8 million tonnes each month. If ongoing attacks remove even 3 to 4 million tonnes of that capacity, replacing those exports becomes extremely difficult. Most competing origins have only limited loading capacity available, making a meaningful substitution nearly impossible.

Russian officials continue telling importers that export commitments will be honored, but that ultimately depends on commercial vessels continuing to call at Black Sea ports. After several consecutive nights of ships being damaged and casualties reported among port personnel, that assumption becomes increasingly uncertain.

If the disruption ultimately proves temporary and only a few million tonnes are delayed, the market can likely absorb it through inventory drawdowns and higher cash premiums. If the logistical bottlenecks continue to expand, however, there is no quick solution. Redirecting 1-2 million tonnes per month is manageable. Attempting to replace 5 million tonnes of Black Sea exports is an entirely different challenge, and one the global grain pipeline is not built to handle.

We are heading into the last big weather weekend for the corn crop, and it appears Central weather will be warmer and drier than yesterday’s solution going into early August. It appears heat could return by the end of July, with rainfall being deficient across the Plains and Western Midwest. Corn and soybean crop conditions will likely show declines on Monday due to this past week, and private corn and soybean yield estimates will likely be adjusted lower. The weather is very different from last year, which produced a record crop, with July much warmer and drier. Attaining 183 BPA dot plot yield guesses for balance sheets is becoming difficult, given that the 10-year average for corn yield is at 176 BPA.

Upside price pressure over the weekend will likely be more focused on the Black Sea, with weather in tow. Any price surges into Monday, July 20, are met with extreme downward seasonal price pressure that carries into the end of July/the opening of August, as grain bins are swept ahead of new-crop storage needs. There is only a 1 in 10 chance of grain prices continuing to push higher through next week after whatever Sunday night/Monday performance produces. Position accordingly.