The heat is on at a key time in soybean development, and that's pushing the markets up

Forecasts in important soybean growing areas are for hot, dry conditions in August — right as pollination in soybeans hits its stride. That's trimming yield potential and driving the markets higher, Don Wick of Red River Farm Network and Randy Martinson of Martinson Ag Risk Management said on this week's Agweek Market Wrap.

Soybeans were up more than $2 for August contract this week, Martinson said. And that support spilled over into other commodities, namely corn. He explained that tight supplies mean any concerns are going to push the markets higher.

"World supplies are tight for all of the commodities and it just enhances the need to get a good crop in the U.S.," he said.

The Wheat Quality Council's spring wheat tour went through North Dakota and into surrounding states this week, and Martinson summed up the reactions to the potential yields as, "Wow!"

However, he said that while there is a lot of yield potential, the crop remains about three weeks behind on average, which means it needs some cooperation from Mother Nature.

Read more market news:

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"We're going to need quite a bit of time to get this crop to maturity," he said, noting some small grains harvest has begun in some places.

While the weather was a big factor for the markets this week, it wasn't the only one. The back-and-forth on getting grain out of Ukraine also played a part. Russia and Ukraine were involved in a multi-party deal to get grain exported last week, but there are doubts about what will happen.

"Low and behold, it didn't take long for Russia to start bombing some of those ports," Martinson said. He said Ukraine has indicated it has 17 ships stranded in ports and ready to ship out if they are able. While he thinks taht may have some influence on corn and wheat markets, it won't be a big impact.

Another factor this week was the Federal Reserve raising interest rates .75 points again. Martinson said that actually was a positive move because some people expected a full point.

"That, I think, helped to relax the market," he said, noting it won't be a huge hit to consumers.

Wick said 60% of the U.S. cattle inventory now is in drought-impacted areas, and the herd already has shrunk considerably. Martinson said that while that's positive long term, in the short term it might drive prices a bit lower.

"We're seeing a little bit more meat or product being dumped on the market right now," he said.

Lean hogs have been "sharply higher," largely because of herd reduction and strong demand, he said.

The Agweek Market Wrap is sponsored by Gateway Building Systems.