Fuels Hit a Flat Spot

Posted on 07/24/2020 6:59 AM

 

Fertilizers are largely unchanged -- with the notable exception of Kansas, which is flashing opportunity. Conspicuously, fuels are unchanged as well. It is likely price pressure will arrive for diesel and for propane. I would expect propane to exhibit price softness more readily than diesel simply because propane tends to be more nimble than diesel.

But I do believe diesel prices will fall based on the number of airlines reporting they expect to slash their workforces around the first of September, when federal funding runs out. That seems just as counterintuitive as the spring swoon did. Prices can fall during peak ag demand season? Well, in 2020, it appears they can.

We are fully booked for the rest of the summer and harvest. We tagged the low at $1.39 and were able to take advantage before prices rebounded. But as odd as it seemed that farm diesel prices could fall during the height of planting season, it suggests there may be opportunities to take advantage of another price dip, perhaps even during harvest. It EIA distillate stocks chartseems unlikely that prices will fall back to $1.39, but national distillate stocks played a large role in influencing the spring price decline, and stocks are currently higher than they were at the $1.39 price low.

Keep your powder dry on both diesel and propane. I want to see where this goes. Propane stocks are also on the rise, but less aggressively so. Since we are filled on diesel but needing propane, we will be watching both, but with an eye toward propane for the time being. Historically, we have observed the seasonal propane price low in mid-August to early September, but will remain vigilant in watching for opportunities.Farm diesel price chart

Farm Diesel --

  • Our regional average farm diesel price has been stuck at $1.52 for three consecutive weeks.
  • Nebraska gained 3 cents as Kansas, Minnesota and Michigan each added 2 cents per gallon. But all other states were unchanged, weighing on our regional average per gallon price.
  • August heating oil futures closed at $1.25 on Thursday, July 23, up 3 cents on the week.
  • According to EIA, national distillate stocks firmed 1.1 million barrels in the week ended July 17, now a massive 41.1 million barrels above the same time last year.
  • September WTI Crude oil futures closed Thursday's session at $41.21, up 28 cents on the week.
  • Our farm diesel/heating oil futures spread is inching back toward territory that would indicate softer diesel ahead, but mild upside risk remains for the time being (see chart at bottom).propane price chart

Propane --

  • Our regional average propane price has also been unchanged for three consecutive weeks at $1.09 per gallon.
  • Nebraska was our only price mover in propane this week, down a penny. All other states were unchanged.
  • According to EIA, national propane stocks 2.040 million barrels to a level 7.421 million barrels above the same time last year, but still within the five-year average supply range.
  • The seasonal low will be in soon and dealers are likely readying fall fill bids. Be sure to estimate your usage and prepare to book when prices have indicated a clear bottom. Given the build in stocks this week, we see no urgency to book just yet.

Fuel
7/6/20
7/13/20
Week-over Change
Current Week
Fuel
Farm Diesel
$1.52
$1.52
Unchanged
$1.52
Farm Diesel
LP
$1.09
$1.09
Unchanged
$1.09
LP

Farm diesel/heating oil futures spread

 

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