Farm Fuel Pricing: A Year-Over Comparison With Preliminary 2013 Price Targets

July 3, 2013 07:02 AM

Nutrient prices may have spent the last year in decline, but fuels are currently above last year, and while the distillate supply and propane stocks have made gains, prices continue to firm. For both farm diesel and LP, the lowest price of the year (July 2012-July 2013) was recorded during the first week of July. Since then, prices added a quarter for farm diesel and 11 1/2 cents to the LP price.

Farm Diesel -- farmfuels7 3

We expect farm diesel to take its annual trip to the upside during the summer months. WTI crude has been a rough barometer of where farm diesel is headed, and with WTI crude at $100.00 and farm diesel at $3.401, look for downside action to be limited in farm diesel by strength in WTI futures for the time being. That is not to say that a fall in WTI will mean a correlated fall in farm diesel, but softer WTI is a requirement for softer farm diesel.

Price projections fall in the $3.40 area, and if last year is any indication, July 1, 2014 could have ruby red adding another 25 cents. That would put next July's price at $3.65. If that makes you nervous, book a portion at today's price of $3.401. The chart shows farm diesel moving higher starting the first of August, and continuing to climb into November. This highest priced farm diesel of 2012 came right in the middle of harvest.

If you believe history is an indicator and that strength in WTI means strength for fuels, farm diesel is about to make its summertime run to the upside. We recommend booking a portion of harvest needs at a price at-or-below $3.40/gallon.

Farm Diesel
2012 Average
Current Price
Spread 7/12-7/13


LP --

LP has been generally flat through the last year and ended the fertilizer year just about where it started. Pricing moved slightly higher during the year in a gentle arc on the chart. Price projections here are less certain, but propane stocks are above year-ago. LP pricing, while stable, will follow power generation and home heating and air conditioning. A long, hot summer could push prices higher, but LP has been on a downward track since reaching a high of $1.505 during the second week of March 2013.

Demand is weak at present and we see LP moving slightly lower in the near term, and in response to increased demand for climate control, move higher with summer temperatures. Demand is expected to be high if grain dryers run in force this fall. Our 2013 price target is above the regional average price right now and we believe the time to book a portion of LP needs is now. If LP adds another 11 cents by next July, the price then will be $1.514. Here again, if that number makes you nervous, book a portion and look for scattered opportunities in the months ahead to book more.

Note: the pricing data here is based on regionwide averages. Local pricing will vary so check with your preferred supplier.





Back to news


Spell Check

No comments have been posted to this News Article

Corn College TV Education Series


Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!


Market Data provided by
Brought to you by Beyer