The Good: Despite the fact that gasoline prices have been moving back to pre-pandemic levels, diesel prices continue to see only modest price appreciation. The Canadian average diesel prices this past week averaged 95.8 cents per litre. The fundamental for diesel continues to be negative as inventories in the U.S. remain at near record levels. The higher gasoline prices are keeping diesel production relatively high, which means that inventories are not likely to shrink significantly until the economy hits full stride.
The Bad: As the HRW harvest progresses in southern Kansas, protein levels continue to drop. After an encouraging start for protein content in Texas and southern Oklahoma, protein levels have started to drop from initial levels. Protein levels in south central Kansas are falling mostly in the 11.0 to 11.5 per cent range. Normal protein content for the HRW crop is 12.5 per cent. Protein content is expected to get better as the harvest moves northward. Al lower protein crop in Kansas would leave domestic miller scrambling for high protein winter wheat in Texas and Oklahoma, which will reduce the exports from the region. Millers will also look to spring wheat to incorporate into their blends. This should help boost spring wheat domestic use in the coming year. The next two weeks will tell the tale on protein content in the HRW crop.
The Ugly: Canadian inflation data for the month of May saw the CPI (Consumer Price Index) drop by 0.4 per cent. When you exclude gasoline prices the monthly change was +0.7 per cent. The number was below expectations and the numbers did not provide very many encouraging signs that the economy is restarting with any vigour. The only good news was that the drop in the overall CPI was largely due to low gasoline prices. June CPI will likely be positive as gasoline prices have moved up by more than 10 cents per litre during the past month.