Farm Fuels in Focus: On-farm Demand Wanes

Posted on 03/09/2017 10:25 AM

 

  • July 2016 natural gas opened today at $2.70 -- up 12 cents from our last Fuels in Focus.
  • Farm Diesel is down a penny on the week at an average of $1.85 per gallon.
  • August 2016 WTI crude oil opened the day at $50.30 -- up $4.31 from our last report.
  • July 2016 Heating oil futures opened the day at $1.52 -- up 4 cents from our last report.
  • Propane softened a penny on the week to an average of 99 cents per gallon regionally.

Diesel"Farm Diesel -- Diesel prices eased a bit as demand for spring fieldwork slowed. Half of the twelve states in our weekly price survey were unchanged this week. Michigan led the way down falling 15 cents per gallon as the Dakotas fell a combined dime. Missouri and Nebraska each firmed a nickel as Iowa firmed 4 cents per gallon.

Crude oil futures firmed slightly on the switchover to the august contract. Brexit initially had a negative impact on global crude oil prices, but WTI has since recovered most of those losses. Uncertainty in the global marketplace has a tendency to force commodities to overdo price moves in response to news which is baked with so much uncertainty. Our outlook for farm diesel, which is based on WTI crude oil futures, has not changed.

We expect near-term price softness in farm diesel as a result of declining seasonal on-farm demand and rangebound trade in WTI crude futures. If other nations follow Britain's lead, uncertainty will build which will add support to crude oil futures which will also support higher farm diesel. According to our heating oil/farm diesel spread analysis, on-farm diesel prices are expected to fall slightly and trend sideways until outside markets firm sustainably.

For now, fill farm diesel needs hand-to-mouth, but if the distillate and crude oil markets make a run to the upside, we will act quickly and cover at least some fuel needs for harvest.

  • Distillate inventories reported by EIA firmed 0.2 million barrels to 152.3 mmbbl. Stocks are currently 16.9 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.73 in Missouri and the Midwest high is at $2.13 in Indiana.
Farm Diesel 6/23/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.74
$1.78
4 cents
$1.82 Iowa
Illinois
$1.89
$1.90
Unchanged
$1.90 Illinois
Indiana
$1.87
$2.13
Unchanged
$2.13 Indiana
Wisconsin
$1.92
$1.92
Unchanged
$1.92 Wisconsin
Minnesota
$1.90
$1.92
Unchanged
$1.92 Minnesota
South Dakota
$1.88
$1.88
-9 cents
$1.79 South Dakota
North Dakota
$1.66
$1.82
-1 cent
$1.81 North Dakota
Nebraska
$1.74
$1.75
5 cents
$1.80 Nebraska
Missouri
$1.80
$1.68
5 cents
$1.73 Missouri
Kansas
$1.73
$1.75
Unchanged
$1.75 Kansas
Ohio
$1.88
$1.88
Unchanged
$1.88 Ohio
Michigan
$1.86
$1.95
-15 cents
$1.80 Michigan
Midwest Average
$1.82
$1.86
-1 cent
$1.85 Midwest Average

LP

Propane -- With home heating season over, there isn't much to say about propane. As far as we can tell, infrastructure is still in solid shape and production continues at a pretty good clip. Supplies at present are ample seasonally which should keep prices in line with our expectations through the offseason and into winter 2016-17. We will be watching for the midsummer low to book for winter.

  • According to EIA, last week, national propane inventories firmed 1.210 million barrels -- now 2.407 million barrels below the same time last year at 79.561 million barrels.
  • The regionwide low is at $0.85 per gallon in Ohio and the regionwide high is in Indiana at $1.26.
LP 6/23/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.89
$0.94
-1 cent
$0.93 Iowa
Illinois
$0.99
$0.99
Unchanged
$0.99 Illinois
Indiana
$1.05
$1.26
Unchanged
$1.26 Indiana
Wisconsin
$1.10
$1.10
-10 cents
$1.00 Wisconsin
Minnesota
$0.95
$0.95
-1 cent
$0.94 Minnesota
South Dakota
$0.89
$0.89
6 cents
$0.95 South Dakota
North Dakota
$0.89
$0.80
6 cents
$0.86 North Dakota
Nebraska
$0.89
$0.89
1 cent
$0.90 Nebraska
Missouri
$1.12
$1.12
4 cents
$1.16 Missouri
Kansas
$1.08
$1.10
-2 cents
$1.08 Kansas
Ohio
$0.85
$0.85
Unchanged
$0.85 Ohio
Michigan
$1.05
$1.10
-12 cents
$0.98 Michigan
Midwest Average
$0.98
$1.00
-1 cent
$0.99 Midwest Average

 

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