Farm Fuels in Focus: Book Winter Propane, Hold Off on Diesel

Posted on 03/09/2017 10:25 AM

 

  • September 2016 natural gas opened today at $2.83 -- down 3 cents from our last Fuels in Focus.
  • Farm Diesel is unchanged on the week at an average of $1.83 per gallon.
  • September 2016 WTI crude oil opened the day at $41.84 -- higher 72 cents from our last report.
  • September 2016 Heating oil futures opened the day at $1.32 -- up 2 cents from our last report.
  • Propane is unchanged on the week at an average of $0.98 per gallon regionally.

Farm Diesel -- Farm diesel is unchanged on the week at $1.83 per gallon. North Dakota and Indiana each fell a penny per gallon as Minnesota led declines, softening 4 cents per gallon to $1.88. Kansas firmed a penny per gallon to $1.79. All other states were unchanged on the week.

diesel"Crude oil prices dipped below $40 per barrel last week but quickly firmed above $40 again, although analysts do not expect a sharp price increase in the foreseeable future. Gasoline prices at the pump have trended lower over the past few weeks, and as EIA reported a 3.3 million barrel gasoline stocks draw, crude oil futures responded higher on the assumption that a draw in gasoline stocks would favor increased demand among refiners.

Heating oil futures have fallen as well which suggests near-term farm diesel softness. But price pressure is likely to be short lived as harvest draws near. Agricultural demand will put a hard floor under farm diesel so we do not want to wait too long before booking harvest supplies. But we do believe there may be another leg down in the next week or two for farm diesel so we are willing to hold tight, and see if prices want to dip.

Keep in mind that diesel is priced well below last year and could be considered a value at present levels. If you can find a bid for diesel below $1.75, pull the trigger on at least a portion of your harvest needs, and top of for remaining summer needs.

  • Distillate inventories reported by EIA firmed 1.2 million barrels to 153.2 mmbbl. Stocks are currently 8.3 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.74 in Missouri and the Midwest high is at $1.92 in Wisconsin.
Farm Diesel 8/5/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.81
$1.80
Unchanged
$1.80
Iowa
Illinois
$1.90
$1.84
Unchanged
$1.84
Illinois
Indiana
$1.99
$1.92
-1 cent
$1.91
Indiana
Wisconsin
$1.92
$1.92
Unchanged
$1.92
Wisconsin
Minnesota
$1.95
$1.92
-4 cents
$1.88
Minnesota
South Dakota
$1.84
$1.77
Unchanged
$1.77
South Dakota
North Dakota
$1.84
$1.84
-1 cent
$1.83
North Dakota
Nebraska
$1.84
$1.78
Unchanged
$1.78
Nebraska
Missouri
$1.74
$1.74
Unchanged
$1.74
Missouri
Kansas
$1.78
$1.78
1 cent
$1.79
Kansas
Ohio
$1.92
$1.84
Unchanged
$1.84
Ohio
Michigan
$1.85
$1.85
Unchanged
$1.85
Michigan
Midwest Average
$1.87
$1.83
Unchanged
$1.83
Midwest Average

 

propanePropane -- Gains and declines basically offset each other in this week's price action although gains did have the upper hand. Indiana led declines, falling 5 cents as Michigan fell 2 cents. Ohio led gains, firming 8 cents per gallon as Kansas added a penny. If you have not yet booked propane for home heat, now is the time to pull the trigger. As I have said before, many retailers have already offered bids for winter supplies and a lot of those bids will be good through September.

Just a few weeks ago, we were anticipating a dry end to the growing season which would limit propane demand for grain drying. That may not be the case and forecasters have added rainfall to their August outlooks. That would add demand-based price support to propane and while you are booking propane for home heat, I would recommend at this time to go ahead and book at least a portion of your anticipated needs for LP for drying fuel.

Prices have been flat for long enough now that we believe the downside has been exhausted, and if demand from agriculture surprises the industry, prices will hike at the time when farmers are bring crops in from the fields. Infrastructure is in good shape and supplies are strong, leaving price support up to demand features which could be significant if August weather turns wet, especially if September follows the same pattern.

Propane is priced at value levels and is below last year so pulling the trigger on 100% of your home heat, confinement and grain drying needs at current prices is definitely not the worst idea I have heard.

  • According to EIA, last week, national propane inventories firmed 0.266 million barrels -- now 0.513 million barrels below the same time last year at 89.865 million barrels.
  • The regionwide low is at $0.86 per gallon in North Dakota and the regionwide high is in Kansas at $1.09.
LP 8/5/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.93
$0.93
Unchanged
$0.93
Iowa
Illinois
$0.99
$0.99
Unchanged
$0.99
Illinois
Indiana
$1.21
$1.13
-5 cents
$1.08
Indiana
Wisconsin
$0.99
$0.99
Unchanged
$0.99
Wisconsin
Minnesota
$0.92
$0.93
Unchanged
$0.93
Minnesota
South Dakota
$0.95
$0.95
Unchanged
$0.95
South Dakota
North Dakota
$0.86
$0.86
Unchanged
$0.86
North Dakota
Nebraska
$0.86
$0.89
Unchanged
$0.89
Nebraska
Missouri
$1.06
$1.06
Unchanged
$1.06
Missouri
Kansas
$1.08
$1.08
Unchanged
$1.09
Kansas
Ohio
$0.85
$0.85
8 cents
$0.93
Ohio
Michigan
$1.09
$1.09
-2 cents
$1.07
Michigan
Midwest Average
$0.98
$0.98
Unchanged
$0.98
Midwest Average

 

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