My 2 Cents July 14/23
- grainguy12
- Jul 14, 2023
- 2 min read
Markets made some decent gains after a bearish USDA report. Most would tell you that Thursdays gains were weather driven but that is only a small factor in the rally. The key component in the markets was the weakness in the USD. And with that weakness in the USD came talks of Chinese buyers coming in and buying up some soybeans which also added gas to the fire. Weaker USD supports US commodities and it makes them more competitive in the world market with the exception of Russian wheat which is currently at about $110/mt discount to US. The kicker with a weak USD is the strength seen in the CAD which was up almost ½ a penny which held canola gains back but also hit the wheat basis pretty hard. General rule of thumb is a penny move in the CAD means $0.08 - $0.13 move in basis, unless the graincos feel there is way too much volatility the nit tends to widen a bit more. We cant rule out weather as concerns are getting higher on the condition of the Canadian spring wheat crop and canola. Given the long term forecast showing no rain for the next while means that things could get worse as the crop struggles to fill. The only kicker to all this will be demand and sounds like US millers are already looking to cut spring wheat back out of the blend and add more winter wheat. Not only is there growing concerns here in north America but also parts of Russia, EU and Australia. We also the Black Sea deal set to expire on the 17th which I believe is really a non event if it doesn’t get renewed as Ukraine and Turkey are already working on keeping the shipping lanes open and will do it without Russian support. Between weather, monetary policy, and geo political stuff going on there is a lot of moving parts to keep things on edge. Elevators have been running some “specials” to cover off some of the last trains for the crop year. G3 last week loaded out their first train, there is an office expansion happening at P&H in Tisdale at the elevator which was started back in May I believe and sounds like at the current pace will be completed sometime. JRI in Melfort is doing a major upgrade to their facility with the addition of a loop track along with a full overhaul of their equipment to keep up with the jones across the road. With graincos doing large expansions the competition for grain is going to increase and even more so with a shorter crop but that’s just my opinion…
