23/4/22

The Aussie dollar continued to fall in overnight trade, back sharply against the US dollar. The better yields in the US will continue to draw US dollars back to the US. The fall in the AUD is roughly equal to AUD$9.35 to wheat values vs US futures.
The hike in US rates is needed to rein in inflation. Inflation that was first described as transitionary inflation, now it’s full on inflation apparently. They never really talk about how this inflation was created though. Was it printing 20% of all the US dollars ever put into circulation over the last 2 years ? Is it supply based inflation due to “unexpected lockdowns” in major supply nations forcing prices higher. This appears to be fabricated inflation.
At the end of the day we, as a commodity based economy, with the value of the AUD linked closely to the value of our exportable commodities really shouldn’t care less if the US inflation rate continued higher, pushing the AUD lower. I mean it’s not like there is anything available to import anyway, we may as well just enjoy the lower dollar and higher export values in the short term I guess (fert / chem are bad casualties though).
Powell seems more intent on pushing US rates higher, Lagarde not so much. The ECB view is that energy prices are a huge problem and are making inflation look a lot worse than it should be. The supply factor another major issue. The Ukraine / Russia war impacting ECB actions more than the US.

Meanwhile in the grain markets canola and rapeseed won the night.  Paris rapeseed jumping E21.75 in the new crop and Winnipeg closing C$19.40 higher for the Jan23 slot. This was against the trend lower in US soybean future which shed 25c/bu in the Jan23 slot.
Although Europe isn’t “dry” as yet there are large parts of France, Germany, the UK and the Nordic states that are seeing less than average rainfall. Things are not as bad as they are in the US and SW Saskatchewan just yet but the combination of limited Black Sea access and the dry is worrying.

26/4/22

The AUD is lower again in overnight trade. The US dollar is now at a 2 year high as the punters expect a full 50 point increase in official US rates in the FED meeting this May. There is also plenty of speculation about what the AusFed will do, some have a 50 point increase pencilled in for the June meeting. Big ask, it will need to have some serious fundamental backing as it will hurt an already suffering economy.
China easing the forex reserve ratio to 8% signals a slight improvement there but the main concern was the government’s announcement that all of Beijing will be tested prior to the end of April. Prompting thoughts of a Shanghai like shut down in the capitol.
Much of the FED moves globally are now being focused on deflating commodity prices.

The US spring wheat belt has its own issues, slightly more pressing than the potential 50pt jump in interest rates. When there are snow drifts across fields up to 2 mtrs deep on the 25th of April there is likely to be a slight delay to spring wheat planting. Further south in the US, there may not be 2mtr snow drifts but the wet weather was thought to be delaying row crop planting. This offered support to Chicago corn futures. The cash market is not as convinced as the futures market though. Basis decreasing across a number central US corn belt consumers. The weekly crop progress report out after the close confirmed the consumer sentiment, corn 16% sown, 1% better than the 5 year average. US weekly wheat export sales were poor.
China announced they will stop holding their weekly wheat auction as state reserves are shrinking and demand is also reducing as lock downs hurt consumption. These kind of announcements do make you wonder if China really does hold 51% of total world wheat ending stocks.
Algeria are in for 50kt of durum wheat, we should see some feedback on this tomorrow. Algeria do not make public their tender results.