Crude Oil's Deflationary Trigger . . . .

[errolanderson]

Eleven (11) straight trading sessions and counting that the king of commodity markets 'CRUDE OIL' have declined. This is now the longest consecutive daily decline in global oil prices . . . ever. WTI now breaking well below $60 per barrel. WCS oil struggling to stay above $20 per barrel.

This will intensify the current deflationary wave engulfing global commodity markets including ag, precious metals and industrials (IMO). Global trade is now clearly slowing with ample shipping capacity now on-the-sidelines.

U.S. Fed 'playing-up' the inflation story hiking rates in-order to again have 'some rope' to cut rates in the next downturn. Bank of Canada rate hikes couldn't come at a worst time (IMO) . . . .

[furrowtickler]

Eleven (11) straight trading sessions and counting that the king of commodity markets 'CRUDE OIL' have declined. This is now the longest consecutive daily decline in global oil prices . . . ever. WTI now breaking well below $60 per barrel. WCS oil struggling to stay above $20 per barrel.

This will intensify the current deflationary wave engulfing global commodity markets including ag, precious metals and industrials (IMO). Global trade is now clearly slowing with ample shipping capacity now on-the-sidelines.

U.S. Fed 'playing-up' the inflation story hiking rates in-order to again have 'some rope' to cut rates in the next downturn. Bank of Canada rate hikes couldn't come at a worst time (IMO) . . . .

Sometimes it gets confusing with what is happening around the world as you point out Errol , no doubt oil is slipping. But we as farmers are still starring directly at ever increased costs , almost daily if you have priced out fertilizer over the past two weeks . Machinery continues to skyrocket... so is it the deflation that leads to inflation?? Kinda smart ass but reality simply does not reflect to what coming out of our pockets ???
So should we expect lower costs for fuel , fert , machinery?? Not increased costs ?
If lower , just how bad are we currently getting screwed?

[farmaholic]

Furrow...as I mentioned before the Fert thing feels like 2008 all over again but not to the same extent.

Regarding the commodities we produce, aren't they cheap enough relative to costs? Look at the grain prices Mallee is throwing around.

Canola, wheat, lentils, and yellow peas are no screaming hell already. Guys around here won't be making much on soybeans. Maybe we'll see stronger prices after the hang over from GrainCos over indulging in Harvest Happy Hour subsides.

Edit in...and fuel prices are ****en insane compared to a barrel of Canadian crude.

[ajl]

Sometimes it gets confusing with what is happening around the world as you point out Errol , no doubt oil is slipping. But we as farmers are still starring directly at ever increased costs , almost daily if you have priced out fertilizer over the past two weeks . Machinery continues to skyrocket... so is it the deflation that leads to inflation?? Kinda smart ass but reality simply does not reflect to what coming out of our pockets ???
So should we expect lower costs for fuel , fert , machinery?? Not increased costs ?
If lower , just how bad are we currently getting screwed?

Expect lower prices for the commodities you produce. Those have been in a clear deflationary trend for some time now. The most obvious example is canola in 2012 was $14USd per bushel. Today around $7.75 USD per bushel. Farmers tend to be all about inflation so they miss deflation when it is sitting in front of their nose. Input suppliers get this and collude on prices. As for getting screwed: yes and badly. The eighties were as bad as they were because farmers getting used to hyper inflation just could not see deflation in time and it wiped many out. Prices in loonie terms are irrelevant. Always convert to $USD for an indication. Looking at green fallow and sludging here in 2019.

[biglentil]

Gold really didnt pull back for very long after the 2008 crisis. The chart really goes to shit after 1971, when the world went to funny money. Quite the interesting monetary experiment we live in these days. Reminds me of the Chinese proverb said to be a curse, "May you live in interesting times!"

[errolanderson]

Total washout in crude oil prices (down 6%) today. Key support of $55 per barrel now clearly in-the-gunsights. Western Cdn Select (WCS) oil prices broke below $15 per barrel.

And here's a mind-boggling fact about massive gov't overruns and overspending . . . .
Financing the U.S. debt is now on-course to exceed the cost of running of the entire U.S. military.

This is a huge mess that is going to create serious financial pain . . . .

[ajl]

Total washout in crude oil prices (down 6%) today. Key support of $55 per barrel now clearly in-the-gunsights. Western Cdn Select (WCS) oil prices broke below $15 per barrel.

And here's a mind-boggling fact about massive gov't overruns and overspending . . . .
Financing the U.S. debt is now on-course to exceed the cost of running of the entire U.S. military.

This is a huge mess that is going to create serious financial pain . . . .

That is a sobering thought and then you realize that every country in the world is more screwed than the US simply because the US has one of the most diverse economies in the world. Ties into your comment regarding WCS and the fact that bitumen is free right now.

[malleefarmer]

Idle reminder that there's still 34 million barrels of in-the-money WTI $60 puts outstanding before expiry tomorrow

[malleefarmer]

Some wool market comments Errol from last week peaked about a month ago declining since.

Reasons being put forward as to the rapid change in wools pricing
are numerous and mostly all play their part, but it is prudent to
firstly look towards China, who is responsible for 76% of the export
destination of Australian wool and the most likely market to provide
the best lead.
In general, China has been experiencing deteriorating economic
conditions since the commencement of the US-China Trade battle.
According to Reuters , economic growth has slowed to its weakest
quarterly pace since the global financial crisis at 6.5 percent, exhibiting
lacklustre domestic demand by Chinese standards.
China's manufacturing sector had extremely limited growth last
month following on from the practically zero growth figure recorded
in September. For a nation that has been experiencing double
digit growth figures for the best part of a decade, this alone is reason
enough for close monitoring.
Reportedly, export orders within most Chinese manufacturing sectors
contracted even further during October. A tightening of monetary
conditions around the world, financial markets in somewhat of
a turmoil, in addition to the slowdown in Chinese demand, affects
market sentiment and therefore investment and raw material procurement
decisions. Wool and the overarching textile trade is not
immune to any or all of those heavy influences.
As disappointing as the clip value drop from the heights of August
is, as in any trading markets, context is key to making informed
decisions. The prices of this week offered at auction (1776ac) are
nearly spot on the 18 month (1769ac) average of prices paid at
auction.

[errolanderson]

Thanks Mallee for the post . . . . China is definitely slowing, but also means that all commodity exporters such as Canada, Australia and New Zealand will take a heavy economic hit. Now the BOC hikes rates. Good grief . . . .

But the U.S. economy is also slowing . . . Trump is definitely feeling the heat from the massive financial fallout across the Midwest. USDA data doesn’t even begin to reflect the increase in soybean stocks by spring if this trade war persists. What does the American farmer plant next spring? Corn? Soybeans? China has the U.S. over-a-barrel on the ag fallout.

This tariff war has created perma-damage for the American Midwest (IMO). Nobody wins a trade war.

[malleefarmer]

china is huge for australia wool and particularly feed barley.

apparently many traders here expecting grain prices to "fall off a cliff" once the true size of aussie crop is know be it big or small, but once known trader end users can work out there plans imports or in case of trader suppliy contracts with different origin or blend perhaps.

[errolanderson]

china is huge for australia wool and particularly feed barley.

apparently many traders here expecting grain prices to "fall off a cliff" once the true size of aussie crop is know be it big or small, but once known trader end users can work out there plans imports or in case of trader suppliy contracts with different origin or blend perhaps.

Agree Mallee, grain price risk is huge right now. My frustration is as an observer is that this train wreck could be seen miles away, but political agendas, political egos get in the way. Tariffs have been the trigger of this calamity (IMO).

What is occurring right now is devastating for markets and in some cases irreparable.

[sawfly1]

Interesting to see Canadian oil
Executive s . Calling for the Canadian govt to implement .
Mandatory production cuts for the industry.

It seems oil Co.s are producing
Themselves into poverty.
Acting like farmers

[farmaholic]

Interesting to see Canadian oil
Executive s . Calling for the Canadian govt to implement .
Mandatory production cuts for the industry.

It seems oil Co.s are producing
Themselves into poverty.
Acting like farmers

Belly laughed...LOL.

At sub $20/barrel that MUST be below COP.

News says the Industry is suggesting throttling production.

Pump prices would tell me otherwise...seems there's no correlation to the cost of a barrel.

[Misterjade9]

Interesting to see Canadian oil
Executive s . Calling for the Canadian govt to implement .
Mandatory production cuts for the industry.

It seems oil Co.s are producing
Themselves into poverty.
Acting like farmers

Heard a good one on the radio news this afternoon. Cenovus wants the Alberta gov. to mandate lower oil production