* Diplomacy hopes on Iran conflict dragged oil lower, pressuring grains
* Forecasts call for August Midwest rain as soybeans enter key pod-filling stage
* Potential for larger Black Sea crop prospects also weighed on wheat prices (Adds closing US market prices)
CHICAGO, Aug 4 (Reuters) – Chicago Board of Trade grain and soybean futures fell sharply on Tuesday, following oil markets lower, after comments by Qatari and U.S. officials raised hopes for a diplomatic resolution to the Iran war that could improve oil flows through the Strait of Hormuz, traders said. Wheat traders continued to track risks to Black Sea export flows from fighting between Russia and Ukraine, while corn and soybean traders continued to closely track crop conditions in the United States following a stretch of hot, dry weather in the Midwest. After Monday’s close, the U.S. Department of Agriculture lowered its condition rating for the nation’s corn for a third straight week, while soybean ratings held steady following a larger-than-anticipated drop a week earlier.
Recent rain and cooling temperatures have been seen as bearish for futures, analysts said. USDA also reported that corn conditions improved in the eastern Corn Belt, including in Ohio, Indiana and No. 2 corn state Illinois. Ratings were flat in top producer Iowa, but fell in Nebraska, Minnesota, Kansas and North Dakota, USDA data showed.
“When the energy markets slipped, so did the grains,” said Jim Gerlach, president of A/C Trading in Brookston, Indiana. “Now, they’re trading weather and improving weather.” CBOT’s most-active corn futures contract settled 7 cents lower at $4.65-1/2 a bushel, while soybeans fell 14-1/2 cents to $11.77-3/4 per bushel.
The agency reported that 61% of corn was in good-to-excellent condition as of Sunday, down from 63% good to excellent a week earlier. It was the lowest corn condition rating for the 31st week of the year since 2023, according to USDA data. Analysts polled by Reuters, on average, had expected the rating to remain steady with last week.
Weather forecasts projected regular rain and moderate temperatures in much of the Midwest for the first half of August as U.S. soybeans enter a crucial growth period. Hot and dry weather during the Midwest corn crop’s critical pollination stage of development in July has likely dented yield potential, analysts said. August is a more critical month for soybean yield potential, when rains are needed to aid pod filling.
Still, some market analysts have seen signs of heat damage to farmer corn crops. Gerlach said that farmer clients of his in Indiana have sent pictures of ears showing heat stress, raising concerns mid-season about how the heat may ultimately be impacting fall yields. The most-active CBOT wheat contract closed down 12-1/2 cents at $6.38-1/2 per bushel. The contract had risen 1.8% on Monday, rebounding from a three-week low as renewed attacks on vessels in the Russia-Ukraine war rekindled concern about disruption to massive exports through the Black Sea. Ukraine and Russia have been using drones and missiles to attack one another’s ships and ports. Russian export prices fell last week under pressure from rising freight rates and insurance premiums, analysts said, though they still expect Russia to ship more wheat in August than in July.
However, large global supplies, including the prospect of bumper harvests in the Black Sea region, were keeping wheat prices in check.
(Additional reporting by Gus Trompiz in London and Peter Hobson in Canberra; Editing by Sherry Jacob-Phillips, Joyjeet Das and Daniel Wallis)
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