Farm Fuels in Focus: Winter Supply Build Limits Upside

March 18, 2016 11:45 AM
  • LP is unchanged on the week at $1.02 per gallon.
  • April 2016 natural gas opened today at $1.93 -- up 16 cents from our last Fuels in Focus.
  • Farm Diesel is 1 cent higher on the week at an average of $1.48 per gallon.
  • April 2016 WTI crude oil opened the day at $40.25 -- higher $2.52 from our last report.
  • April 2016 Heating oil futures opened the day at $1.25 -- 4 cents higher than our last report.

DieselFarm Diesel -- Wheels are turning and diesel is burning in the southern Corn Belt. Temperatures have taken a dip in parts north so fieldwork has yet to take off in a big way through the Central and Northern Belt. It doesn't take a neurosurgeon to figure out firmer crude oil and heating oil will mean firmer farm diesel, especially as we head into a period of heavy seasonal demand on the farm. We suspect all three bottomed in mid-February and while we do expect summer diesel prices to retreat from the spring high, I do not expect us to get back down to a regional average of $1.43.

It was deep declines in crude oil that led to low farm diesel prices. The flip side is, higher crude will lead to higher diesel. Refiners have been busily chugging away making distillate fuels through the winter in the low-price crude environment. Their low feedstock costs will limit farm diesel pricing for the time being, but once production runs are completed with WTI at $40 per barrel and the "cheaper" produced product runs out, prices will likely take a good solid jump.

Global crude oil stocks will continue to limit WTI prices, but we expect crude to settle in to a higher range between $35 and $45 per barrel near-term. That projects farm diesel to a regional average around $1.90-$2.00 per barrel. As I said however, diesel prices will not firm sharply until supplies refined in this winter's low crude price environment are exhausted. Get current to 100% filled on diesel for spring/summer and consider booking 50% of expected needs for fall to guard against higher late summer prices. We have not issued official advice for booking for fall yet, but at current prices, consider filling a portion for harvest.

  • Distillate inventories reported by EIA fell 1.1 million barrels to 161.3 mmbbl. Stocks are currently 35.5 mmbbl above the same time last year.
  • The regionwide low currently lies at $1.37 in North Dakota and the Midwest high is at $1.64 in Wisconsin.
Farm Diesel 3/18/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$1.43
$1.44
Unchanged
$1.44
Iowa
Illinois
$1.50
$1.50
Unchanged
$1.50
Illinois
Indiana
$1.58
$1.61
1 cent
$1.62
Indiana
Wisconsin
$1.64
$1.64
Unchanged
$1.64
Wisconsin
Minnesota
$1.47
$1.54
Unchanged
$1.54
Minnesota
South Dakota
$1.41
$1.43
1 cent
$1.44
South Dakota
North Dakota
$1.38
$1.37
Unchanged
$1.37
North Dakota
Nebraska
$1.39
$1.44
Unchanged
$1.44
Nebraska
Missouri
$1.47
$1.51
Unchanged
$1.51
Missouri
Kansas
$1.36
$1.36
2 cents
$1.38
Kansas
Ohio
$1.39
$1.43
Unchanged
$1.43
Ohio
Michigan
$1.41
$1.39
Unchanged
$1.39
Michigan
Midwest Average
$1.45
$1.47
1 cent
$1.48
Midwest Average

LP

Propane -- Propane supplies are still very strong. This week's cooler weather could lead to slight increases near-term, but this week ten of our twelve states are unchanged on LP. Iowa and Michigan each firmed a penny, but our regional average price is unchanged.

  • According to EIA, last week, national propane inventories firmed 0.180 million barrels -- now 8.216 million barrels above the same time last year at 62.500 million barrels.
  • The regionwide low is at $0.87 per gallon in Kansas and the regionwide high is in Indiana at $1.33.
LP 3/18/16
Three Weeks Ago
Previous Week
Change
Current Week
 
Iowa
$0.97
$1.01
1 cent
$1.02
Iowa
Illinois
$0.94
$0.94
Unchanged
$0.94
Illinois
Indiana
$1.36
$1.33
Unchanged
$1.33
Indiana
Wisconsin
$1.00
$1.00
Unchanged
$1.00
Wisconsin
Minnesota
$0.96
$0.96
Unchanged
$0.96
Minnesota
South Dakota
$0.89
$0.89
Unchanged
$0.89
South Dakota
North Dakota
$0.91
$0.91
Unchanged
$0.91
North Dakota
Nebraska
$0.88
$0.89
Unchanged
$0.89
Nebraska
Missouri
$1.19
$1.18
Unchanged
$1.18
Missouri
Kansas
$0.87
$0.87
Unchanged
$0.87
Kansas
Ohio
$0.95
$0.95
Unchanged
$0.95
Ohio
Michigan
$1.16
$1.25
1 cent
$1.26
Michigan
Midwest Average
$1.01
$1.02
Unchanged
$1.02
Midwest Average

 

DieselIndex