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Farm Fuels in Focus: Diesel Unchanged, Above Year-ago

April 22, 2014
By: Davis Michaelsen, Pro Farmer Inputs Monitor Editor

 

  • LP falls 4 cents to $1.83 on the week.
  • May '14 natural gas opened today at $4.69 1/2 -- up 7 1/2 cents on the week.
  • Farm Diesel is unchanged at an average of $3.47 per gallon.
  • June '14 WTI crude oil opened the day at $103.60 -- up 4 cents on the week.
  • At the open the WTI/Brent crude oil spread widened $2.24 on the week to $6.28 with June '14 Brent opening $2.28 higher on the week at $109.88.

 

Propane -- Picture4

Prices slowed their downward trajectory, but by our count, between now and July 1, if the regional propane price drops an average of four cents per week, that would mean LP has 40 cents to give yet per gallon. But that would miss last year's peg at $1.25 by about 20 cents. EIA reports another strong week of additions to LP storage, up 0.773 million barrels (mmbbl) to 28.357 mmbbl. That is still 10.669 mmbbl behind year-ago, but supplies have rebounded back to within the five-year average.

Building supplies will help limit the upside for propane, however, EIA reports this week that petroleum products including distillates and propane are in high demand on the global export market. That may inject as much as a 20 cent premium over year-ago prices and as time passes, I am less convinced that amid strong global demand, U.S. domestic propane will recover all the way back to $1.25.

prstuss

We have some time for propane to come our way by summer, but our pricing targets for that time are starting to feel low.

Our continuing recommendation, and that of the propane industry is to pre-book winter and agricultural supplies to help your preferred retailer get a handle on demand when prices hit their low. In addition, experts recommend adding to your on-farm propane storage to guard against shortages and delivery constraints.

 

The regionwide high is at $2.55 in Missouri and the regionwide low is currently in Nebraska at $1.44.

LP 4/22/14
Three Weeks Ago
Previous Week
Current Week
Change
Iowa
$1.81
$1.78
$1.78
Unchanged
Illinois
$1.79
$1.72
$1.72
Unchanged
Indiana
$2.43
$2.14
$1.86
-$0.29
Wisconsin
$1.85
$1.85
$1.85
Unchanged
Minnesota
$1.94
$1.90
$1.89
-$0.01
South Dakota
$1.98
$1.73
$1.73
Unchanged
North Dakota
$1.96
$1.76
$1.75
-$0.01
Nebraska
$1.58
$1.49
$1.44
-$0.05
Missouri
$2.46
$2.65
$2.55
-$0.10
Kansas
$1.60
$1.60
$1.54
-$0.06
Ohio
$1.69
$1.69
$1.69
Unchanged
Michigan
$2.21
$2.21
$2.26
+$0.05
Midwest Average
$1.94
$1.87
$1.83
-$0.04

 

Farm Diesel -- Picture3

Farm diesel is unchanged again this week at a regionwide average of $3.47 with 6 of the 12 states in our index unchanged. The biggest upside move was a 5 cent increase in Michigan to $3.47 with Indiana shucking 11 cents to $3.60. Nebraska, Minnesota and North Dakota all added pennies, and this week's price action suggests the spring flat spot for farm diesel pricing is here.

We wrote last week that we feel we are leveling off too soon, and at too-high-a price. Indications have been that crude oil is pointed lower, but this week WTI crude climbs only 4 cents on the week. We are on a hair trigger on supplies for spring and summer fieldwork, but we will wait for a signal the downside is exhausted.

Farm diesel and propane are on similar paths presently. Bananas, hot dogs and milk are all moving higher due to inflationary factors and current market conditions, and the realist in me has expected higher prices year-over for farm fuels. The timing compared to last year is right for farm diesel to level off, and we are now three weeks running at a regional average of $3.47. Last year, we pulled the trigger at $3.36 and would like to get back there again.

disstuss

Limiting the downside here are increased exports of distillates to South and Central America and Europe.

Distillate inventories reported by EIA last week increased 0.2 million barrels (mmbl) to 113.2 mmbbl. Stocks are currently 0.4 mmbbl above the same time last year.

The regionwide low currently lies at $3.29 in Nebraska and the Midwest high is at $3.63 in the Dakotas.

 

Farm Diesel 4/22/14
Three Weeks Ago
Previous Week
Current Week
Change
Iowa
$3.38
$3.38
$3.38
Unchanged
Illinois
$3.76
$3.57
$3.57
Unchanged
Indiana
$3.81
$3.71
$3.60
-$0.11
Wisconsin
$3.32
$3.32
$3.32
Unchanged
Minnesota
$3.45
$3.45
$3.46
+$0.01
South Dakota
$3.45
$3.63
$3.63
Unchanged
North Dakota
$3.58
$3.62
$3.63
+$0.01
Nebraska
$3.27
$3.28
$3.29
+$0.01
Missouri
$3.37
$3.38
$3.38
Unchanged
Kansas
$3.36
$3.36
$3.35
-$0.01
Ohio
$3.57
$3.57
$3.57
Unchanged
Michigan
$3.43
$3.42
$3.47
+$0.05
Midwest Average
$3.47
$3.47
$3.47
Unchanged

 

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RELATED TOPICS: Inputs

 
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