November soybeans were trading 40 cents higher near 7:30 cst this morning and to a new contract high. China soybean futures were up 3% overnight and Malaysia palm oil prices were up 0.7%. The grain rally is all about the weather as outside market forces remain weak. Chinese equity markets were lower overnight, with the market seeing fresh calls for economic support from the Chinese leaders as a sign of additional weakness in coming Chinese data. In other words, the markets seemed to prefer to spin potentially favorable Chinese developments into a negative overnight. European shares were also weaker with debt concerns combining with residual global slowing fears to pressure asset prices at the start of the new trading week. The US scheduled report slate today will be mostly thin today with a Consumer Credit reading the only scheduled data point of note. Expectations do call for a modest rise in US Consumer Credit and to some that might hint at positive growth, while others might suggest that fueling the US economy on credit isn't sustainable in the long run. In the end, a number of physical commodity markets are showing gains early today despite the potential for a risk-off vibe from Treasuries, equities and the currency markets. There were no deliveries posted for July soybeans. There were also no meal deliveries but oil deliveries were reported at 1,270 contracts to bring the total this month to 12,499. The market faces potentially historic tightness this season and this assumes significant price rationing of demand if yield potential drops below last year's level. When looking at crop conditions, soil dryness and the Midwest weather forecast for the next ten days, traders are beginning to push yield estimates well below last year. Keep in mind; traders see a drop of 3-6% from last week in good-to-excellent ratings. Last week, the crop was rated 45% good/excellent as compared with 66% last year. Weather for soybean crops in the southern Midwest, delta and far eastern Corn Belt this week looks much more favorable with moderating temperatures and chances of rain almost daily. However, the central Midwest looks very dry for the next 10 days and this should add to the drought stress in this region. If yield drops to last year's level, and no adjustments are made for demand, ending stocks drop to just 55 million bushels with a 1.7% stocks/usage. Both of these would be a record low and below pipeline minimum. If yield drops to 39.7 bu/acre, same as 2008/09, a negative ending stocks of 81 million bushels shows up on paper. Keep in mind; yield was 33.9 in 2003 and 38 in 2002 but soil conditions and crop condition comparisons this year are looking at disastrous yield seasons of 1988 and 1983. The market took a breather on Friday to close lower but August soybeans gained on the September and November options after the USDA reported that U.S. exporters sold 120,000 tonnes of soybeans to China for the 2011/12 marketing year. Export sales for the week came in at a whopping 1.763 million tonnes which was more than double the size of the high end of trade expectations. Cumulative soybean sales stand at 103.6% of the USDA forecast for 2011/2012 (current) marketing year vs. a 5 year average of 99.8%. Traders see the USDA in a tough position for the Supply and Demand update for Wednesday as ending stocks were already tight and yield expectations are collapsing.