Farm Fuels in Focus: Downside Potential Limited

May 13, 2016 01:18 PM

 

  • LP is down 1 cent on the week at $1.01 per gallon.
  • June 2016 natural gas opened today at $2.13 -- down a penny from our last Fuels in Focus.
  • Farm Diesel is 5 cents higher on the week at an average of $1.69 per gallon.
  • June 2016 WTI crude oil opened the day at $46.41 -- up $2.37 from our last report.
  • June 2016 Heating oil futures opened the day at $1.39 -- 5 cents higher than our last report.

dieselFarm Diesel -- Crude oil market volatility has picked up and fund activity is driving WTI futures higher. Heating oil futures have firmed on declining inventories, and it looks like the downside for farm diesel will be limited, even after spring demand is exhausted. Farm diesel prices have fallen 91 cents per gallon since the end of spring fieldwork in June 2015. That downtrend pressured the per gallon price down to $1.43 when we advised booking for spring and summer needs.

Since placing that February low, farm diesel has firmed 18%. Seasonal indicators suggest farm diesel will at least level-off at or near current levels. Crude market activity has bulls in charge of price action and higher crude pricing will put a dent in downside potential for farm diesel. We do expect prices to give us an opportunity to top off summer supplies and book for fall fieldwork, but lower diesel prices will not make it to corn country for another few weeks.

We will keep an eye on crude oil -- which some believe has overdone it to the upside and may need a retest of $30 per barrel. Whether or not crude tests a 3-handle, as agricultural demand fades, opportunities to book farm diesel will follow.

  • Distillate inventories reported by EIA fell 1.6 million barrels to 155.3 mmbbl. Stocks are currently 27.1 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.51 in North Dakota and the Midwest high is at $1.92 in Wisconsin.
Farm Diesel 5/13/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.54
$1.54
2 cents
$1.56
Iowa
Illinois
$1.80
$1.80
-1 cent
$1.79
Illinois
Indiana
$1.84
$1.95
-5 cents
$1.90
Indiana
Wisconsin
$1.60
$1.60
32 cents
$1.92
Wisconsin
Minnesota
$1.70
$1.70
2 cents
$1.72
Minnesota
South Dakota
$1.59
$1.59
26 cents
$1.85
South Dakota
North Dakota
$1.50
$1.48
3 cents
$1.51
North Dakota
Nebraska
$1.48
$1.51
4 cents
$1.55
Nebraska
Missouri
$1.59
$1.59
-5 cents
$1.54
Missouri
Kansas
$1.52
$1.53
5 cents
$1.58
Kansas
Ohio
$1.64
$1.68
Unchanged
$1.68
Ohio
Michigan
$1.53
$1.69
-1 cent
$1.68
Michigan
Midwest Average
$1.61
$1.64
5 cents
$1.69
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 1.318 million barrels -- now 4.717 million barrels above the same time last year at 73.176 million barrels.
  • The regionwide low is at $0.85 per gallon in Ohio and the regionwide high is in Indiana at $1.17.
LP 5/13/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.92
$0.92
Unchanged
$0.93 Iowa
Illinois
$1.18
$1.18
Unchanged
$1.16 Illinois
Indiana
$1.50
$1.26
-24 cents
$1.17 Indiana
Wisconsin
$1.10
$1.10
Unchanged
$1.10 Wisconsin
Minnesota
$0.95
$0.95
Unchanged
$0.95 Minnesota
South Dakota
$0.89
$0.89
Unchanged
$0.89 South Dakota
North Dakota
$0.93
$0.93
Unchanged
$0.89 North Dakota
Nebraska
$0.87
$0.87
Unchanged
$0.88 Nebraska
Missouri
$1.12
$1.12
Unchanged
$1.12 Missouri
Kansas
$1.08
$1.08
Unchanged
$1.08 Kansas
Ohio
$0.85
$0.85
Unchanged
$0.85 Ohio
Michigan
$1.21
$1.13
-8 cents
$1.13 Michigan
Midwest Average
$1.05
$1.02
-1 cent
$1.01 Midwest Average

 

dieselspread