CPI comes in above expectations at 9.1%.

This grain futures were mostly higher after a sharply mixed overnight session but turned abruptly lower after the release of the CPI at 7:30 a.m., coming in at 9.1% year over year, the hottest inflation in 40 years. This pushed the US dollar back to the week’s highs while the stock market and commodity complexes again stumbled in price as a .75% percent interest rate hike is confirmed for the July 25-26 Fed meeting.

The next CPI will show an abrupt decline, as commodities across the various complexes have suffered extreme liquidation and devaluing in the past 45 days. There is no untouched commodity that was seeing new highs in May/June. As grain prices decline, it heightens concerns that world grain supplies will not grow as farmers alter upcoming production plans to the cost analysis and return. It’s very difficult to show historical evidence that grain consumption declines during recessions. If anything, they may be able to show flat lining usage year-over-year. People still eat, they just do without other stuff.

Russia, Turkey, and Ukraine are meeting in Istanbul today to see if they can reach a breakthrough to establish deep-water grain export corridors for Ukrainian grain. Ukraine’s Foreign Minister says he is optimistic for a breakthrough, but Russia continues to demand that the West and its economic sanctions. There is much to be agreed upon, according to sources, and since negotiations are being connected through military personnel, the hope for success is low. Meanwhile, Russia continues aggressive bombardments of Ukraine in the Donbas region as it advances.

Central weather has the EU and GFS models generally agreeing that an extended period of hot/dry weather will impact the Plains and most of the W Midwest over the next two weeks. A Ridge of high pressure will amplify over the Intermountain West and Paul’s eastward. This produces extreme heat across the Plains, Delta, and the W Midwest. High temperatures will range from the ’90s to the lower 100s. A flash drought is developing across the Plains and portions of the W Midwest.

Meanwhile, a cooler pattern for Minnesota, Wisconsin, Michigan, and Ohio will occur with the Ridge riding rain chances that rain drops into WI, N Illinois, and Indiana. Little rain is otherwise expected in other areas of the corn belt into July 25. Dryness looks to remain well into August.

Cattle futures produced a strong close on Tuesday, and anticipate a mixed to higher start this morning on follow-through strength, abrupt weakness in the stock indexes due to the CPI may trim those expectations. August live cattle remain discounted to the cash market but are working on narrowing the difference. The export market is working to offset weakening US demand, but the rise in the greenback threatens beef exports by increasing importers’ costs. Box beef yesterday had choice gaining $0.37 while select was down $0.83. The choice/spread is at a $26.34 choice premium.

Spot feeder cattle prices yesterday achieved the highest price since November 2015. The cash feeder Index is still $8 behind futures, with the cattle/corn spread suggesting that the cash index is still undervalued by potentially $12 and should be over $190 by autumn.