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Blog: Heat damages agriculture (17/06/22)

Kansas cattle have died by the thousands recently. Pig and poultry farms also suffer, as livestock cannot cool down. Record temperatures have suddenly exceeded animals’ ability to cool themselves, both naturally and even in confined feeding operations. Overall production levels are compromised because even those that withstand heat well don’t eat well, affecting health and safety.

By noon on Friday, for August delivery, lean hogs traded at $1.08, while cattle fetched $1.37 a pound.

Large swathes of the corn belt are under stress as farmers monitor long-term forecasts predicting possibly reduced yields during the next critical pollination period. Grain needs rain, and high temperatures are just one factor that can impact yields. Unfortunately, the Wheatbelt also experiences some extremely dry areas, especially in Kansas.

July corn was at $7.86, with wheat returning $10.35 a bushel on Friday afternoon. Soybeans were trading at $17.05.

Gasoline turns around

A fierce slump in unleaded gasoline prices sent gas delivered in July plummeting more than 30 cents a gallon Friday morning. Gas made a worrying double top at $4.31 10 days ago, then crashed to a low of $3.643 (price is without taxes). There is no guarantee that your pump price will suddenly drop by an equal amount, but a drop in average pump prices can be expected. This week’s interest rate hikes by major central banks and a possible subsequent recession were cited as the reason for the price drop.

Gasoline futures traded at $3.67 a gallon for July delivery, while crude hit $109.50 a barrel, down $8 on the day.

Insane volatility of stock index futures

Although the fall in gasoline prices is pleasing to motorists, the sharp drop in stocks and bonds has been difficult for a large segment of novice investors. The bullish crowd is now confused as to what to do with stocks during a bear market. Most fear that a crash will devastate their portfolios, as many equities have been bought at prices close to current prices or even higher.

A downward move, of course, could be beneficial, as bursting the bubble would allow more conservative and patient investors with cash on the sidelines to buy stocks at lower prices when the bulls eventually bail out. Traders are watching the rate of inflation, the hawkish Federal Reserve, and geopolitical tensions, among other topics.

On Friday afternoon in September, the S&P traded at 3,700, while the Dow Jones traded at 30,000.