Sep 22, 2014
Home| Tools| Events| Blogs| Discussions Sign UpLogin

Inputs Insights

RSS By: Davis Michaelsen, Pro Farmer

Inputs Monitor Editor Davis Michaelsen adds his perspective into the happenings of the inputs markets.

Watch Farm Diesel and Burn Your Corn

Feb 21, 2014


This week marked our last stop on the Pro Farmer annual Profit Briefing trail at the Par-A-Dice in Peoria, Illinois. A snow storm rolled in the early morning hours of that Monday and had Chip and I not decided to leave the night before, we might have missed it altogether.

Attendance was definitely impacted by slick roads, but those who did brave the elements were anxious to hear what we had to say, and even more anxious to share with us the things on their minds. Propane was a concern and we talked it all out, but something else I talked about had a few growers looking for a chance to pull me aside quietly... farm diesel risk.Picture6

We have written about this a little, but the idea is that at midwinter, your Inputs Monitor has advised to fill up to 50% of projected spring needs, hoping for a chance to fill remaining needs at an annual price break in the spring. However that price break may not be there this year.

Today natural gas rose above $6.00 in the front-month contract. The East Coast answers much of its home heat and power generation demand with natural gas however, in times of high natgas pricing -- like now -- the infrastructure is set up to switch to heating oil, and they intend to this year.

Lagging distillate stocks has also had an influence on WTI crude pricing as demand for refined products -- like heating oil and farm diesel -- skyrockets. Today, we note the March heating oil contract opening at its daily high of $3.18. That number has been steadily climbing due in part to distillate and refined fuels demand.


Growers wanted to know if it was time to book some farm diesel. My advice was this, if you are out, fill up to 50% to catch up with our present position. The low for this winter has come and gone, but prices could be much higher by spring, and we may miss that spring low altogether. The impacts of a winter wrought with fuel shortages and price spikes on farm diesel pricing is uncharted territory, and we advise to cover yourself at present prices, especially if you are out.

Another thought that came up comes a little out of left field, but I have to address this. This sounded a little ridiculous from the journalist's perspective but I've been thinking sarcastically that at these prices, its gotta be cheaper to burn your corn than your propane. Knowing full well that the prospect of low crop returns is nothing to joke about, the idea has bubbled to the surface of several conversations with all kinds of folks and as I was talking about propane in Peroia, a grower shouted out "Burn your corn!"


Corn burners were en vogue a few years ago and business dried up somewhere around 2008, I've been told. If propane is at a regional average of $3.79 per gallon and I have been holding up a plant with a corn burner I bought in 2003, is $4.50 corn cheaper to burn for home heat than LP?

The simple answer lies in the Btu's. One bushel of corn lasts the average corn burner about one full day and yields 200,000 Btu. That's heat for a part of your home -- depending on the size of your stove -- all day priced at $4.50. 200,000 Btu's of propane currently runs in the neighborhood of $8.25.

By the numbers, corn is currently much cheaper to use for home heat, if you have the gear. Now I'm not one of those 'preppers' you hear about railing against 'the grid', but this is becoming an economic concern and if corn prices stay low and propane prices stay elevated into the coming winter, let's just say corn is giving us some food for thought.

Thanks to all who attended Pro Farmer's Profit Briefing in Peoria and elsewhere. We get some of our greatest ideas from conversations at these deals, and this year has been no exception. We look forward to seeing you at another Pro Farmer event in the future.

Log In or Sign Up to comment


No comments have been posted, be the first one to comment.
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by|Site Map|Privacy Policy|Terms & Conditions