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Crude Oil Continues Its Slump

USDA Crop Progress Report shows corn and soybean conditions unchanged for the week.

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Grains were mixed overnight with wheat lower while corn and soybeans had modest advances in the overnight session. Crude oil continued to slump adding to yesterday’s sharp losses.

Yesterday after the close USDA’s crop progress report showed both corn and soybean condition ratings unchanged for the week at 76% and 71%, respectively. Also, both crops are developing ahead of normal. Corn is currently 79% silking versus a 5-year average of 70% while beans are 76% blooming versus 66% for normally for this time of year.

In world news, China has experienced heavy rains of late bring 6 to 9 inches in core corn producing areas of North China. While difficult to assess immediate damage to the corn crop, rain of this intensity has likely resulted in some widespread flooding across much of the region. The situation could be made even worse if the heavy rainfall were to continue over the next several weeks, but a dry and pattern would allow fields to dry down more rapidly.

The European Union's crop-monitoring service (MARS) raised its forecast slightly for the average soft wheat yield in this year's EU harvest as a sharp increase in the projection for Bulgaria offset a cut in rain-affected France. In its monthly report the MARS service pegged the average EU soft wheat yield at 6.10 tonnes per hectare (t/ha), up from 6.07 t/ha seen in June. The estimate was 2.9% below last year's yield but 4.6% above the five-year average. MARS cut its soft wheat yield estimate for France, whose wheat crop has been hit by torrential rain in the spring and low sunshine, to 7.37 t/ha, from 7.45 t/ha estimated last month. It would be 6.9 percent below 2015, but 0.5 percent above the five-year average.

Oil on Tuesday hit its lowest mark since May, falling towards $44 a barrel, pressured by concerns that a long-awaited rebalancing of the market would be delayed due to excess supply. Record crude output from the Organization of the Petroleum Exporting Countries, a glut of refined products and signs of more drilling activity in the United States in the face of low oil prices have added to concern about excess supply. U.S. drillers added oil rigs for a fourth consecutive week and traders fear continued increases would threaten a market weighed by excess supply for two years.

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