November soybeans were trading down 8 cents near 7:00 cst this morning. China soybean futures were down 1.3% overnight and Malaysia palm oil futures were down 1.9%. The Shanghai Composite managed a marginal gain overnight, but volume was low and hopes for fresh stimulus were not upgraded significantly. Similarly European shares were able to claw out some minor gains, perhaps in anticipation of the US Fed testimony later today. US equities were in an early positive track, with some players thinking another muted inflation reading (from CPI) could increased the expectation of easing hints from the Fed testimony. The markets will also be confronted with US industrial Production and Capacity utilization readings, which could be countervailing. The market will also see an NAHB housing index release that is expected to post a minor gain and that report could provide a slight lift to the risk-on crowd. Testimony from the US Fed Chairman is scheduled to begin at 9:00 am cst and that will be backed up by a speech from the Bank of Cleveland President at mid session. November soybeans were up as much as 16 1/2 cents on the session to new all-time highs overnight before the sell-off to trade lower on the day. The weather outlook remains supportive with some let-up in the heat and some rain for the northern and eastern areas of the Midwest in the next few days before the heat begins to build again as a ridge of high pressure centers over Iowa for next week. This could leave areas in Iowa dry with temperatures approaching 100 again by the middle of next week. Chicago is expected to be 100 today and 97 again by Tuesday. The weekly crop updates showed that just 34% of the US crop is rated good/excellent compared to 40% last week and 64% last year. The 10 year average for this time of year is 61%. The worst ratings were in 1988 at 19%. In 1988, however, rains returned to the mid-west for the second half of July which helped crop conditions improve. The outlook this year calls for worsening conditions for next week and maybe beyond if the weather pattern does not shift. NOAA announced that the current US drought is the worst since 1956. Poor to very poor ratings reached 30%, up 3 from last week and this compares with 32% in 1988. By July 22nd in 1988, only 23% of the crop was rated poor to very poor. In 1988, soybean yield was down 18.3% from the 10-year average. This year, the USDA has pegged yield down 8.5% from the 10-year average. If yield expectations slip to 1988 equivalent, a yield of 36.16 bushels per acre could be in store for this season. This would leave total supply at 192 million bushels below the USDA projection for demand for the 2012/13 season or about 300 million bushels below the pipeline minimum. November soybeans closed sharply higher (up 38 cents) yesterday and moved as high asd 1607 overnight. Reports that soybean growth has slowed and plants are stunted in the central Midwest have traders wondering if the most recent USDA yield estimate of 40.5 bushels/acre is too high. For Indiana, only 11% of the crop is rated good/excellent with Illinois coming in at 17%. Iowa conditions fell 10% to 38% good/excellent. NOPA monthly crush data yesterday showed June crush at 134.156 million bushels vs. 117.178 million bushels in June 2011. This was more than 1 million bushels above expectations and suggests that the record high prices for soybeans have done little in the way of destroying demand. Weekly export inspections were reported at 14.3 million bushels as compared with 12.3 million bushels on average needed each week to reach the USDA projection.