Heat Heaves Markets

This summer's exceptionally hot and dry weather has been wreaking havoc on the grain markets, but high temperatures have made an impact on other commodities markets as well.

Hogs, which are typically transported live in enclosed semi trailers or trains, are especially sensitive to heat stress. As a result, high temperatures can hinder the movement of hogs, keeping pork away from processors and grocery store shelves. These short term supply shortages have caused price spikes, which have been exacerbated by elevated feed costs for livestock producers. Since early May, prices for lean hogs have risen nearly 20 cents per pound (+23%), with hogs for August delivery trading at 95.5 cents per pound as of midday Friday.

Natural Gas Bubbles Higher

The recent wave of hot weather has kept American families indoors and out of the sun. As a result, millions of Americans are using more electricity to power air conditioners to cool down their homes. Given that 21.5% of U.S. electricity is generated from natural gas, prices for natural gas have been pressing higher, reaching $3.18 per million British Thermal units this week, up 40% over the last five weeks.

Ethanol Exacerbates the Corn Shortage

As the summer sun continues to bake the corn crop, ethanol producers have been hit hard, as they have had to pay more for corn, the commodity they use to produce the fuel additive. Ethanol producers have been hurt especially hard in areas where corn supplies are already low, and they have had to compete with local livestock producers for the precious crop. In these areas, ethanol producers have been paying more than 50 cents per bushel over September corn futures, which have been hovering around $8.00 per bushel in recent days.

Draghi Drives Markets Higher

Financial markets were impacted by comments early Thursday morning by European Central Bank president Mario Draghi who stated he would do "whatever it takes to preserve the euro." Draghi stated that the ECB would use its power to print money in order to stimulate the European economy, inspiring heavy buying in precious metals, crude oil, the U.S. stock market, and the euro currency.