Farm Fuels in Focus: Diesel Crests Year-ago

Posted on 03/09/2017 10:25 AM

 

  • January 2016 natural gas opened today at $3.42 -- down 29 cents from our last Fuels in Focus.
  • Farm Diesel is up 3 cents on the week at an average of $1.85 per gallon.
  • January 2016 WTI crude oil opened the day at $51.10 -- up 18 cents from our last report.
  • January 2016 Heating oil futures opened the day at $1.65 -- up 3 cents from our last report.
  • Propane is unchanged on the week to an average of $1.11 per gallon regionally.

Farm Diesel -- Farm diesel was mixed this week with South Dakota firming 16 cents to lead gains as Michigan added 9 cents and Ohio firmed 8 cents per gallon. Just three states were unchanged as Missouri fell 9 cents and Indiana softened a penny per gallon.

inputsmonitor.com"Price action in farm diesel is driven this week by higher crude oil and distillate futures prices. We have been expecting a December swoon, but for the first time since May 2013 retail farm diesel broke above the year-ago price tag. Last year at this time diesel was priced two cents below toady's price at $1.86 per gallon. That is a bullish indicator as was the news of an OPEC agreement finally being forged. We booked nitrogen and potash this week and are on edge over farm diesel.

We believe the OPEC cuts will need to be seen before they are believed, but the trade has been more than willing to take OPEC's word that world crude oil supplies will be trimmed by the 4.5% cut to daily output. The trouble is, with prices firming, U.S. drillers will bring staled production back online and we have seen impressive numbers of rigs coming back online in the past few weeks. Higher crude futures will encourage that trend as will President-elect Trump's picks for oil hawks on his cabinet and in key positions of the upcoming administration.

If Trump's White House truly eases regulations on U.S. crude production, prices will likely sink once again, this time in a more favorable regulatory environment that may even impact margins for producers positively.

But we cannot ignore the weather's impact on heating oil prices which directly impact diesel pricing. If pressed, I would admit I'm a short-term bull on farm diesel, but the upside does not appear sustainable over the longer-term. We may just advise growers top off winter needs if another dip comes and wait until closer to spring when demand for heating oil begins to wane seasonally before booking diesel for spring fieldwork.

  • Distillate inventories reported by EIA fell 0.8 million barrels to 155.9 mmbbl. Stocks are currently 4.0 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.79 in Kansas and the Midwest high is at $1.95 in South Dakota.
Farm Diesel 12/16/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.86
$1.83
2 cents
$1.85
Iowa
Illinois
$1.94
$1.94
Unchanged
$1.94
Illinois
Indiana
$1.96
$1.94
-1 cent
$1.93
Indiana
Wisconsin
$1.92
$1.92
Unchanged
$1.92
Wisconsin
Minnesota
$1.91
$1.88
4 cents
$1.92
Minnesota
South Dakota
$1.79
$1.79
16 cents
$1.95
South Dakota
North Dakota
$1.84
$1.84
Unchanged
$1.84
North Dakota
Nebraska
$1.78
$1.77
6 cents
$1.83
Nebraska
Missouri
$1.91
$1.91
-9 cents
$1.82
Missouri
Kansas
$1.75
$1.75
4 cents
$1.79
Kansas
Ohio
$1.81
$1.81
8 cents
$1.89
Ohio
Michigan
$1.81
$1.81
9 cents
$1.90
Michigan
Midwest Average
$1.86
$1.85
3 cents
$1.88
Midwest Average

 

inputsmonitor.comPropane -- Price action favored a more mixed tone this week with only three states unchanged. Gains were led by a 6 cent hike in Nebraska as Iowa and Michigan firmed 2 cents and Missouri and Minnesota added a penny. Indiana led to the downside falling 11 cents per gallon as Illinois shed a penny to round out overall declines.

Still no sign of supply constraints on the propane side, but as the rest of the petroleum sector firms, propane is likely to follow. As with diesel, we remain skeptical that the current rally in crude, home heating fuels and diesel is sustainable but the bearish factors will take some time to impact the fuel markets. As with diesel, we will continue to wait for propane to signal an imperative to book before topping off winter supplies. However, we advised at midsummer to book 100% of your needs for winter propane, and your on-farm supplies should last you until late March.

  • According to EIA, last week, national propane inventories softened 3.629 million barrels -- now 3.352 million barrels below the same time last year at 95.623 million barrels.
  • The regionwide low is at $0.95 per gallon in The Dakotas and the regionwide high is in Indiana at $1.38.
LP 12/16/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.99
$1.00
2 cents
$1.02
Iowa
Illinois
$1.22
$1.22
-1 cent
$1.21
Illinois
Indiana
$1.55
$1.49
-11 cents
$1.38
Indiana
Wisconsin
$1.15
$1.15
Unchanged
$1.15
Wisconsin
Minnesota
$1.06
$1.07
1 cent
$1.08
Minnesota
South Dakota
$0.95
$0.95
Unchanged
$0.95
South Dakota
North Dakota
$0.95
$0.95
Unchanged
$0.95
North Dakota
Nebraska
$0.96
$0.97
6 cents
$1.03
Nebraska
Missouri
$1.15
$1.15
1 cent
$1.16
Missouri
Kansas
$1.08
$1.07
Unchanged
$1.07
Kansas
Ohio
$1.10
$1.10
Unchanged
$1.10
Ohio
Michigan
$1.25
$1.25
2 cents
$1.27
Michigan
Midwest Average
$1.12
$1.11
Unchanged
$1.11
Midwest Average

 

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