Another week, another rally in grain futures.

The likes of corn and wheat have got into the habit of fading on Fridays, but going mega on Mondays. This has now happened five times in a row.

As US Commodities put it: "Liquidation occurs ahead of the weekend in case a US weather pattern changes. The pattern does not change over the weekend and the market spikes higher."

In fact, there is some rain on its way

"The short range models, the NAM and the GFS, out to Thursday night are increasing showers and thunderstorms with a cold front coming down from the great lakes into the eastern Corn Belt -0.50-1.25 inches  with  50-60% coverage," WxRisk.com said after the latest run.

Gail Martell, at Martell Crop Projections, said: "The rainfall forecast this week is rather wet, compared to what we've been used to this summer."

'Lost to evaporation'

However, she added: "Bear in mind that the GFS model has persistently overestimated rainfall, compared to what has actually occurred.  This often happens in a drought."

Furthermore, "temperatures today and tomorrow are predicted near 100 degrees Fahrenheit (37.8 Celsius) today and tomorrow in the Midwest corn and soybean belt".

And even if rain does arrive, most "will be lost to evaporation within a few hours of its fall suggesting crop stress will prevail in many areas", World Weather said.

"It will be very difficult for very many locations to experience a net boost in soil moisture for more than a quick day or possibly two."

'A disaster'

In short, as Benson Quinn Commodities said, "yield potentials are retreating at an alarming rate, while excessively warm temperatures are expected over much of the region this week",

In the western Corn Belt, "more signs of stress will become apparent in regions that had been in relatively good shape entering last week".

"The eastern Corn Belt remains a disaster with reports of corn plants dying and soybean plants wilting away in many areas."

US Department of Agriculture data is expected to show a drop of five points, in the week to Sunday, in the proportion of the US corn and soybean crops rated in "good" or "excellent" condition.

And that is before the further deterioration expected this week.

'Further yield declines'

As for the impact of the damage on yields, the cut by the US Department of Agriculture last week to 146.0 bushels per acre in its corn yield forecast, and to 40.5 bushels per acre in its hopes for the soybean yield, is not expected to mark the end of the downgrades.

"Small crops get smaller," a Chicago adage goes.

"Such a hefty [USDA] reduction is likely, in our view, to be followed by further, albeit more modest, yield declines" when the USDA next updates its forecasts, in August, Barclays Capital analyst Sudakshina Unnikrishnan said.

"Weather remains the key risk as continued drought conditions could affect soybean yields further, while corn yields could fall to the 140-to-low-140s bushels-per-acre level."

Informa downgrade

In fact, Informa Economics cut its estimate for the US corn yield to 142.5 bushels per acre, from 153.5 bushels per acre, meaning a 12.49bn-bushel crop.

The soybean yield estimate was cut by 2.0 bushels per acre to 40.0 bushels per acre, with the harvest pegged at 3.01bn bushels.

And even these figures may be too high.

"The trade is now openly discussing a sub-140 bushels-per-acre corn yield, and sub-40 bushels-per-acre soybean yield," US Commodities said.

'Stopped growing to survive'

The impact on prices was to send the December lot soaring to a contract high at $7.78 a bushel, before a slight retreat in late deals to close at $7.72 ½ a bushel, a gain of 4.7%.

The September lot, in its first day as the spot contract, soared 5.4% to $7.76 ¾ a bushel.

And, this time, soybeans managed decent gains too, jumping 2.5% to $15.90 ½ a bushel for November delivery, and hitting a contract high of $15.98 ½ a bushel earlier.

With the drought continuing, hopes are waning for the oilseed to be able to exploit its renowned powers of recovery.

"This is a key pod and yield development period. The soybean plants have stopped growing to survive. They cannot do this forever," US Commodities.

'Wheat crop in retreat'

For wheat, the US situation is more nuanced, in that the winter crop is largely harvested, and the spring crop, grown in the north, which has been cooler and wetter than the Midwest, faring pretty well.

Still, broadly, "wheat exports will move higher as corn exports fall", US Commodities said, adding that "world wheat production this year will be down and exports up".

And there are fears for wheat crops abroad too, notably in Russia, over which some investors are now voicing fears of fresh export curbs, although nothing of the sort has been signalled by officials.

"The Russian wheat crop is in retreat," US Commodities said.

Meanwhile, in Europe, rains are provoking concerns at the size and quality of the French, German and, in particular, UK harvests.

'Stressful weather'

"A persistent trough in the jet stream has produced ultra-wet July weather in northern Europe, threatening the quality of ripening grains in the UK, northern France, Denmark and Germany," Mr Martell said.

"At the same time, high pressure is keeping conditions hot and dry in eastern Russia and Kazakhstan in mid-July.

"The stressful weather is expected to cause further declines in grain production estimates."

Chicago wheat for September finished 4.3% higher at $8.854½ a bushel.

Rapeseed record

In Europe, Paris wheat for November closed up 2.3% at E264.75 a tonne, having earlier hit a contract high of E267.50 a tonne.