Crash on recession or rally on drought fears.

Grain futures again experienced another volatile night session, as sharply higher prices gave way again to the selling vigilantes that show up during the European session after 2:00 a.m., erasing large overnight gains and creating negative losses as we follow the outside market risk-off mentalities. The US dollar bolted to a new 2022 high of 108.61 in the early morning hours, driving the entire commodity complex along with stock indexes sharply lower in the early morning hours. Yet corn recovered along with wheat prices on improving export potential before the end of the night session as threatening weather for the Central US appears to be in the cards over the upcoming two weeks.

The financial world looks at the Federal Reserve’s attack on inflation via increasing interest rates along with a strong dollar as a multi pronged approach that is difficult for importing countries to acquire US supplies because of the increasing currency valuation costs along with interest carrying costs in procuring supplies. This forces importers to seek other supplies until, again, the US becomes a storehouse of last resort. The strength in the dollar and rising interest rates is a problem for grain valuations unless US grain supplies are noted to be dramatically reduced more than they comfortably appear managed on balance sheets from the USDA.

A flash drought is developing in the Central US over the next two weeks that offer extreme heat and dryness. There is no denying the crop stress that will be acute with daily temperatures in the 90s to lower 100S with limited rainfall going into August. From Texas northward to South Dakota and eastward into Missouri, Arkansas, and W Iowa. An area that includes 4.0 Bu of US corn and 1.2 Bil bu of soybean production is at risk, and this doesn’t include Iowa. If heat/dryness starts to move deeper into the Iowa crop growing region, then potential crop damage rises even more with the risk of trend line yields seeing reductions on balance sheets quickly tightening up the carryout. Recall that the USDA put the new crop corn carryout at 1.5 Bil Bu. Just a reduction of 3 Bu/acre from the US corn crop has the carry out back to near 1.2 Bil/Bu, which over the last 2 years has produced $8.00 corn.

The Central weather forecast has been expanded. Of hot/dry weather that impacts the Plains and most of the W Midwest over the next two weeks. The Ridge of high pressure amplifies over the Intermountain West and pulses eastward. There will be rain chances on Friday and this weekend for WI, E IA, N IL, MI, and N IN. Elsewhere throughout Central US, there is little rain expected into July 25. The extended range forecast maintains the Plains/W Midwest dryness into August. The NOAA long-range forecasts for the Central US remain correct in a drought worry is rising sharply each day.

Cash cattle trade yesterday was quoted at $137, and the southern plains, which were steady with last week while trade in Nebraska was quoted steady to $4 lower at 140-145. Dressed trade was down $2 at $230. The choice cutout value was down $0.46 while select was lower by $0.91. The cattle kill numbers are at their highest for the summer, yet cash trade is not slipping to the lower 130s that futures had forecasted initially in June. The market is improving on the potential of the cattle market, absorbing recessionary fears and maintaining the better-than-expected cash price for the kill for the middle of July. This is increasing hopes that potentially the upcoming bull market in cattle numbers this fall are already arriving.