Farm Fuels in Focus: Prepare to Book Diesel and Propane

Posted on 03/09/2017 10:25 AM
  • August 2016 natural gas opened today at $2.75 -- down 11 cents from our last Fuels in Focus.
  • Farm Diesel is unchanged on the week at an average of $1.87 per gallon.
  • August 2016 WTI crude oil opened the day at $45.19 -- lower $4.36 from our last report.
  • August 2016 Heating oil futures opened the day at $1.41 -- down 12 cents from our last report.
  • Propane is up a penny on the week to an average of $1.00 per gallon regionally.

Farm Diesel -- Not a lot of movement in this week's farm diesel price survey. Ten of the twelve states we survey are unchanged. Indiana posts a 3 cent decline by the gallon and Minnesota is down a penny to $1.93. This kind of action is just what we have been looking for. Especially when added to recent crude oil news which includes increasing rig counts, missed expectations on withdrawals from storage and profit taking on long futures positions. Add to that lower heating oil prices, and the opportunity we have been looking for to book some diesel may be right around the corner.

Diesel"We take a closer look at recent crude oil production highlights in our article "WTI Production Shows Signs of Recovery"... click here to view our post. It is very early in the recovery, but declines in the average U.S. cost of production is reviving drilling activity and permit applications. U.S. crude producers have adapted to the lower price points, and the ensuing production increases will undoubtedly pressure U.S. fuel costs, including farm diesel.

Our farm diesel/heating oil spread by the end of the week has firmed to a level at which we would expect farm diesel to come under pressure, but we have noted a lag in heating oil futures and farm diesel retail prices so we will proceed with caution. Be prepared to book diesel in the next few weeks if current WTI, heating oil and distillate fundamentals remain on course.

  • Distillate inventories reported by EIA fell 1.6 million barrels to 148.9 mmbbl. Stocks are currently 11.5 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.73 in Missouri and the Midwest high is at $2.11 in Indiana.
Farm Diesel 7/8/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.82
$1.82
Unchanged
$1.82
Iowa
Illinois
$1.90
$1.90
Unchanged
$1.90
Illinois
Indiana
$2.13
$2.14
-3 cents
$2.11
Indiana
Wisconsin
$1.92
$1.92
Unchanged
$1.92
Wisconsin
Minnesota
$1.92
$1.94
-1 cent
$1.93
Minnesota
South Dakota
$1.79
$1.84
Unchanged
$1.84
South Dakota
North Dakota
$1.81
$1.80
Unchanged
$1.80
North Dakota
Nebraska
$1.80
$1.85
Unchanged
$1.85
Nebraska
Missouri
$1.73
$1.73
Unchanged
$1.73
Missouri
Kansas
$1.75
$1.76
Unchanged
$1.76
Kansas
Ohio
$1.88
$1.92
Unchanged
$1.92
Ohio
Michigan
$1.80
$1.80
Unchanged
$1.80
Michigan
Midwest Average
$1.85
$1.87
Unchanged
$1.87
Midwest Average

 

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

PropaneAs with farm diesel, this week most of the states in our propane price survey are unchanged. In fact, only Indiana's price is changed but the 4 cent Hoosier state increase was enough to influence the regional average price a penny higher. This week's average propane price is 11 cents below the same time last year but still 2 cents above the summer 2015 price low. That suggests there is room for prices to fall slightly although many dealers are already offering winter fill prices just below a dollar.

We expect to bottom around 98 cents per gallon with large orders coming in a dime or more below that when bulk discounts are figured in. this isn't rocket science and if your preferred retailer offers up a deal below 99 cents per gallon, ask for at least another nickel off -- just for good measure -- and book at least a portion of your home heating needs. Once dealers have posted their summer LP price, many times that price is available through September, so there may not be much point in booking in portions here. Click the link above if you have not read my thoughts on booking propane this year.

I still advise booking 100% of your home heating and confinement operation needs through March 2017 before the first snowflakes fly. If you want to gamble on lower late summer prices, gamble on propane for grain drying and on just a portion of confinement heating needs.

  • According to EIA, last week, national propane inventories firmed 2.715 million barrels -- now 0.936 million barrels below the same time last year at 84.788 million barrels.
  • The regionwide low is at $0.85 per gallon in Ohio and the regionwide high is in Indiana at $1.29.
LP 7/8/16
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
$1.26
$1.25
4 cents
$1.29
Indiana
Wisconsin
$1.00
$1.00
Unchanged
$1.00
Wisconsin
Minnesota
$0.94
$0.95
Unchanged
$0.95
Minnesota
South Dakota
$0.95
$0.95
Unchanged
$0.95
South Dakota
North Dakota
$0.86
$0.86
Unchanged
$0.86
North Dakota
Nebraska
$0.90
$0.90
Unchanged
$0.90
Nebraska
Missouri
$1.16
$1.16
Unchanged
$1.16
Missouri
Kansas
$1.08
$1.09
Unchanged
$1.09
Kansas
Ohio
$0.85
$0.85
Unchanged
$0.85
Ohio
Michigan
$0.98
$0.98
Unchanged
$0.98
Michigan
Midwest Average
$0.99
$0.99
1 cent
$1.00
Midwest Average

 

Index


 

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