Currency & Exports
Reuters reported this week that “China’s yuan set a record against the dollar on Thursday morning, with its second quote coming in at 6.1183 per dollar, its highest since the Chinese foreign currency market was created in 1994.”
The stronger Chinese currency makes US goods cheaper in China, a bullish trend for US exports like Central Valley farm goods. The yuan has gained 1.8 percent so far this year.
Big Corn Crop Should Lower Food Prices
Global food prices declined for the third consecutive month, largely driven by lower international prices for grains, soy and palm oil, while sugar, meat and dairy prices were also down, the United Nations Food and Agriculture Organization (FAO) reported this week.
The Rome-based agency said its Food Price Index averaged 205.9 points in July, which is 4 points below June and 7 points lower than in July 2012.
The Index measures monthly changes in international prices of a basket of meat, dairy, cereals, oils and fats, and sugar.
The FAO Cereal Price Index averaged 227.7 points in July, down 8.8 points from June and as much as 33 points below July last year. “The sharp decline mostly reflected falling maize prices as favorable weather boosted hopes of a significant production increase in several leading maize-producing countries,” said the agency.
The agency expects Global food prices could decline further in coming months after hitting their lowest level in more than a year this July as a big US corn crop is harvested.The 2013 U.S. corn harvest is expected to be the biggest ever, with a jump of 30 percent from last year. December corn futures are at multi-year lows of $4.54 a bushel as of August 9.
Gasoline Costs Head Lower Despite Higher Oil Prices
AAA reports gasoline prices were lower this week averaging $3.932 a gallon for regular today – 4.6 cents lower than last week- across southern California.
On the Central Coast, the average price is $4.053, which is 5 cents below last week, 1.4 cents lower than a month ago, and 12 cents more than last year.
“Today is just the ninth day since June 1 that Los Angeles area gas price averages have been below $4 a gallon,” said Auto Club spokesman Jeffrey Spring. “Local wholesale prices have dropped by more than 40 cents since mid-July, so there is continued downward pressure on prices at the pump.”
Gas Buddy says the cheapest price for gas in the state in San Jose at $3.44 a gallon. Gas Buddy says the state average is now $3.88 with prices falling fast .
The cheapest gas in SLO County appears to be at the valero in Morro Bay at $3.89. In Tulare Arco is pumping gas gas for $3.65, the lowest price in the Visalia/Tulare market.
The lower gasoline prices in Augusts fly in the face of higher crude oil prices. In the early weeks of May WTI crude was selling for $91 a barrel compared to $108 per barrel in the beginning of August. The CEC website shows the average price of gas in the state May 5 was $3.91 and $3.95 as of Aug 5 so the big jump up in crude oil costs has not spiked the California gasoline marketplace that faces its own crude realty- lower consumption by the state’s motorists.
The US Energy Information Agency says crude should be falling in coming months too,
This week the EIA said
Crude oil prices increased during the first three weeks of July 2013 as world oil markets tightened in the face of seasonal increases in world consumption, unexpected supply disruptions, and heightened uncertainty over the security of supply with the renewed unrest in Egypt. The U.S. Energy Information Administration (EIA) expects that the Brent crude oil spot price, which averaged $108 per barrel over the first half of 2013, will average $104 per barrel over the second half of 2013, and $100 per barrel in 2014.
The discount of West Texas Intermediate (WTI) crude oil to Brent crude oil, which averaged $18 per barrel in 2012 and increased to a monthly average of $21 per barrel in February 2013, closed below $1.50 per barrel on July 19, 2013, and averaged $3 per barrel for the month. The strong demand for light, sweet crude oil in the Midwest and new pipeline capacity to deliver production from the West Texas Permian Basin directly to the Gulf Coast contributed to the price of WTI rising relative to Brent crude oil. EIA expects the WTI discount to widen to $6 per barrel by the end of 2013 as crude oil production in Alberta, Canada, recovers following the heavy June flooding and as midcontinent production continues to grow.
Rising crude oil prices and seasonal demand increases contributed to U.S. regular gasoline retail prices increasing from an average of $3.50 per gallon on July 1, 2013, to $3.63 per gallon on August 5. EIA expects the regular gasoline retail price to average $3.59 per gallon in the third quarter of 2013, and the annual average price to decline from an average of $3.63 per gallon in 2012 to $3.52 per gallon in 2013 and to $3.37 per gallon in 2014.