Farm Fuels in Focus: Farm Fuels and Summertime Price Risk

Posted on 03/09/2017 10:25 AM

 

  • August 2016 natural gas opened today at $2.86 -- up 16 cents from our last Fuels in Focus.
  • Farm Diesel is up 2 cents on the week at an average of $1.87 per gallon.
  • August 2016 WTI crude oil opened the day at $49.55 -- lower 75 cents from our last report.
  • August 2016 Heating oil futures opened the day at $1.53 -- up a penny from our last report.
  • Propane is unchanged on the week to an average of 99 cents per gallon regionally.

Farm Diesel -- South Dakota and Nebraska led gains in this week's fuel price survey, each firming a nickel. Ohio firmed 4 cents as Minnesota added 2 cents and Indiana and Kansas added a penny per gallon each. North Dakota was our only decliner, falling a penny on the week. Other states were unchanged.

Diesel"Crude oil stocks fell during the week ended June 24 by 4.1 million barrels. Stocks are still well above the five-year average range, but as supplies soften, WTI will be confined in its $10 range until stocks draw down more than the trade expects. Current trends in U.S. crude oil stocks have market watchers feeling mildly bullish, but since declines in U.S. supplies have been mild and incremental, the market cannot support a sharply higher crude oil price. We expect crude oil to inch higher over the coming months.

Distillate supplies are benefiting from increased refinery capacity and utilization, but, as with crude oil, declines in U.S. distillate supplies are keeping a hard floor under heating oil futures, and farm diesel. We do expect Midwestern farm diesel to lend an opportunity around midsummer as supplies are expected to recover. We are looking to walk the balance between the potential for firmer crude oil prices and increasing diesel stocks, and if crude prices take off to the upside, we will be forced to book at least a portion of diesel for fall fieldwork in response.

With farm diesel up 2 cents per gallon this week, and gains fairly small from state to state, we currently advise to book farm diesel hand-to-mouth, and are not willing to overextend just yet. According to our heating oil/farm diesel spread, prices are pointed sideways near-term, but, as with crude oil price risk, firmer heating oil futures prices will presage increases in farm diesel.

  • Distillate inventories reported by EIA fell 1.8 million barrels to 150.5 mmbbl. Stocks are currently 14.7 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.73 in Missouri and the Midwest high is at $2.14 in Indiana.
Farm Diesel 6/30/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.78
$1.82
Unchanged
$1.82
Iowa
Illinois
$1.90
$1.90
Unchanged
$1.90
Illinois
Indiana
$2.13
$2.13
1 cent
$2.14
Indiana
Wisconsin
$1.92
$1.92
Unchanged
$1.92
Wisconsin
Minnesota
$1.92
$1.92
2 cents
$1.94
Minnesota
South Dakota
$1.88
$1.79
5 cents
$1.84
South Dakota
North Dakota
$1.82
$1.81
-1 cent
$1.80
North Dakota
Nebraska
$1.75
$1.80
5 cents
$1.85
Nebraska
Missouri
$1.68
$1.73
Unchanged
$1.73
Missouri
Kansas
$1.75
$1.75
1 cent
$1.76
Kansas
Ohio
$1.88
$1.88
4 cents
$1.92
Ohio
Michigan
$1.95
$1.80
Unchanged
$1.80
Michigan
Midwest Average
$1.86
$1.85
2 cents
$1.87
Midwest Average

propane

Propane -- The first of July is upon us and as we expect to book propane during that month, we offered up A Few Thoughts on Propane Price Risk in a separate InputsMonitor.com article -- click here to read the post.

In this week's price action, all states were unchanged with the exception of Minnesota and Kansas, each up a penny, and Indiana down a penny. Propane prices have been historically flat -- with the notable exception of the 2013-14 winter price spike. Fall price action in LP generally suggests more of the same ahead. National supplies are building ahead of demand for harvest and winter which will likely pressure LP prices at least a bit. But at 99 cents per gallon, the downside may be limited. We will, however, give the market some time to fall before booking for harvest and winter... but expect to book sometime in July.

  • According to EIA, last week, national propane inventories firmed 2.512 million barrels -- now 1.474 million barrels below the same time last year at 82.073 million barrels.
  • The regionwide low is at $0.85 per gallon in Ohio and the regionwide high is in Indiana at $1.25.
LP 6/30/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.94
$0.93
-1 cent
$0.93
Iowa
Illinois
$0.99
$0.99
Unchanged
$0.99
Illinois
Indiana
$1.26
$1.26
Unchanged
$1.25
Indiana
Wisconsin
$1.10
$1.00
-10 cents
$1.00
Wisconsin
Minnesota
$0.95
$0.94
-1 cent
$0.95
Minnesota
South Dakota
$0.89
$0.95
6 cents
$0.95
South Dakota
North Dakota
$0.80
$0.86
6 cents
$0.86
North Dakota
Nebraska
$0.89
$0.90
1 cent
$0.90
Nebraska
Missouri
$1.12
$1.16
4 cents
$1.16
Missouri
Kansas
$1.10
$1.08
-2 cents
$1.09
Kansas
Ohio
$0.85
$0.85
Unchanged
$0.85
Ohio
Michigan
$1.10
$0.98
-12 cents
$0.98
Michigan
Midwest Average
$1.00
$0.99
Unchanged
$0.99
Midwest Average

 

SpreadsFFiF


 

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