Skip to main content

Producer Inflation is edging off

Not entirely surprising, since oil has been in the $90/100 range for a few months, producer price indices have gone negative for a bit. Industrial producer prices are off by 0.2% and raw material prices are down 5.2% (over one month) again the volatility of oil prices is largely to blame here.  A week ago, the WTI traded as low as 89.95, while this morning it "opened" near 95.50 a 6% increase in 7 days.

However, StatsCan had more information on raw materials, not only are prices falling but inventories are rising  (especially aluminum), this could be temporary or an indication of something more permanent.  Car sales stats that came out Friday last week (U.S.) were disappointing.  Although the recent Japanese discovery of rare metals in the sea off the coast of Hawaii  in quantities (and concentration 1,000x larger than what is available on land) could be interesting 

The not so good news is that the IPPI (Industrial Producer Price Index) for the past 12  months is up 5.2% -- it goes to show how serious things are getting on the Canadian inflation front.  Futures for rising interest rates are back up to the 52 range (which implies a 50 bps increase in the short term interest rates within the next 12 months), which is just a market sentiment index (its not an indication of anything but what the market "believes" today).  Two weeks ago it was around 20 (which implied to increase in rates for the next 12 months).

Combating inflation is the sudden strengthening of the CAD, which last week moved from the 1.01/99 range to the 1.04/96 range on Friday.  Amazing week in the markets last week, based on virtually no good news on the economy and very limited corporate earnings the market rose by 5%, still below the May high, but generally disappointing economic news (especially light vehicle sales) did not stop the market rise (on very thin volume).  It would seem that the fabled  "plunge protection team" was in full swing last week!

GDP growth was flat in April -- which was better than expected (0.1%), it would seem that GDP growth is "decelerating" in Canada following the blistering Q1 performance of +3.9%.  It would seem that Q2/11 will be a 1.7% GDP growth -- that remains in line for full year GDP growth of 2.5%.

Aside from that a quiet week -- little serious data out of Canada.

Popular posts from this blog

Ok so I lied...a little (revised)

When we began looking at farming in 2013/14 as something we both wanted to do as a "second career" we invested time and money to understand what sector of farming was profitable.  A few things emerged, First, high-quality, source-proven, organic farm products consistently have much higher profit margins.  Secondly, transformation accounted for nearly 80% of total profits, and production and distribution accounted for 20% of profits: Farmers and retailers have low profit margins and the middle bits make all the money. A profitable farm operation needs to be involved in the transformation of its produce.  The low-hanging fruits: cheese and butter.  Milk, generates a profit margin of 5% to 8%, depending on milk quality.  Transformed into cheese and butter, and the profit margin rises to 40% (Taking into account all costs).  Second:  20% of a steer carcass is ground beef quality.  The price is low, because (a) a high percentage of the carcass, and (b) ground beef requires process

21st century milk parlour

When we first looked at building our farm in 2018, we made a few money-saving decisions, the most important is that we purchased our milk herd from a retiring farmer and we also purchased his milking parlour equipment.  It was the right decision at the time.  The equipment dates from around 2004/05 and was perfectly serviceable, our installers replaced some tubing but otherwise, the milking parlour was in good shape.  It is a mature technology. Now, we are building a brand new milk parlour because our milking cows are moving from the old farm to the new farm.  So we are looking at brand new equipment this time because, after 20 years of daily service, the old cattle parlour's systems need to be replaced.  Fear not it will not be destroyed instead good chunks will end up on Facebook's marketplace and be sold to other farmers for spare parts or expansion of their current systems. All our cattle are chipped, nothing unusual there, we have sensors throughout the farm, and our milki

So we sold surplus electricity one time last summer...(Update)

I guess that we will be buying an additional tank for our methane after all.   Over the past few months, we've had several electricity utilities/distributors which operate in our region come to the farm to "inspect our power plant facilities, to ensure they conform to their requirements".  This is entirely my fault.  Last summer we were accumulating too much methane for our tankage capacity, and so instead of selling the excess gas, that would have cost us some money, we (and I mean me) decided to produce excess electricity and sell it to the grid.  Because of all the rules and regulations, we had to specify our overall capacity and timing for the sale of electricity (our capacity is almost 200 Kw) which is a lot but more importantly, it's available 24/7, because it's gas powered.  It should be noted that the two generators are large because we burn methane and smaller generators are difficult to adapt to burn unconventional gas, plus they are advanced and can &qu