Farm Fuels in Focus: Warmer Temperatures Spur Declines

April 7, 2014 08:10 AM
 

 

  • LP falls 15 cents to $1.94 on the week.
  • May '14 natural gas opened today at $4.44.
  • Farm Diesel falls 2 cents to an average of $3.47 per gallon.
  • May '14 WTI crude oil opened the day at $100.91.
  • At the open the WTI/Brent crude oil spread narrowed 58 cents on the week to $5.59 with May '14 Brent opening $1.36 lower on the week at $106.50.

 

Propane -- Picture1

Propane prices are now back below the level from where they spiked in January but are still 45 cents above year-ago in regional averages. As temperatures have warmed seasonally, lp demand has dropped significantly giving suppliers a chance to catch up and replenish stocks. This week notes nearly a million barrel increase in storage levels. As storage levels come back, prices will continue to tumble.

The January jump-off price was $2.05. From there, prices went straight up to $4.09 the following week. The whole ordeal had many wondering if prices would come back down -- how ya gonna keep 'em on the farm when they've seen Paris? This week's action, crossing below crisis pricing levels, suggests by July we may be right back where we started, pricewise.

prstuss

Our 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.

Propane inventories reported by EIA last week increased 0.910 million barrels (mmbl) to 26.568 mmbbl. Stocks remain 13.169 mmbbl below the same time last year.

The regionwide high is at $2.43 in Indiana and the regionwide low is currently in Nebraska at $1.58.

LP 4/7/14
Three Weeks Ago
Previous Week
Current Week
Change
Iowa
$2.16
$1.88
$1.81
-$0.07
Illinois
$2.65
$2.09
$1.79
-$0.30
Indiana
$2.51
$2.43
$2.43
Unchanged
Wisconsin
$2.10
$1.85
$1.85
Unchanged
Minnesota
$2.35
$1.89
$1.94
-$0.46
South Dakota
$2.09
$2.09
$1.98
Unchanged
North Dakota
$2.07
$2.07
$1.96
Unchanged
Nebraska
$1.83
$1.60
$1.58
-$0.23
Missouri
$2.55
$2.47
$2.46
-$0.08
Kansas
$1.60
$1.60
$1.60
Unchanged
Ohio
$2.69
$2.69
$1.69
-$1.00
Michigan
$3.31
$2.52
$2.21
-$0.31
Midwest Average
$2.32
$2.09
$1.94
-$0.15

 

Farm Diesel -- Picture2

Farm diesel softened 2 cents this week to a regionwide average of $3.47 with 4 of the 12 states in our index unchanged. The biggest upside move was a 7 cent increase in Minnesota to $3.45 with South Dakota shucking 9 cents to $3.45. Other moves trended +/- six cents with the trend pointed lower.

Sources had confirmed to the Inputs Monitor that during times of high demand and high natural gas pricing, municipalities are equipped to switch from burning natural gas to burning fuel oil for power burn. We had feared during the doldrums of winter that farm diesel prices might respond higher if too much such switching were to take place.

I believe that has contributed to higher pricing in Indiana which is caught between the Chicago market and the East Coast, both of which used an awful lot of home heat. Like propane, as temperatures climb, we expect farm diesel to fall. The chart indicates that farm diesel is on course for a normal spring. EIA reports positive additions to storage on the week and the indication from the last two years running is that Ruby Red will continue lower, and level off sometime this month.

disstuss

Is now a god time to book farm diesel? It is if you are out, but crude oil is lower on positive news from Libya. Farm diesel follows crude pricing pretty closely in times like these and we expect your diesel has some downside room to run. We are happy to let it do so for now... stay tuned.

We pulled the trigger on 50% of spring needs at the January low and are biding our time to fill the rest for spring and summer.

Distillate inventories reported by EIA last week increased 0.6 million barrels (mmbl) to 113.0 mmbbl. Stocks are currently steady with the same time last year.

The regionwide low currently lies at $3.27 in Nebraska and the Midwest high is at $3.81 in Indiana once again this week.

Farm Diesel 4/7/14
Three Weeks Ago
Previous Week
Current Week
Change
Iowa
$3.45
$3.39
$3.38
-$0.01
Illinois
$3.79
$3.77
$3.76
-$0.01
Indiana
$3.83
$3.81
$3.81
Unchanged
Wisconsin
$3.70
$3.32
$3.32
Unchanged
Minnesota
$3.43
$3.38
$3.45
+$0.07
South Dakota
$3.56
$3.54
$3.45
-$0.09
North Dakota
$3.62
$3.62
$3.58
-$0.04
Nebraska
$3.39
$3.33
$3.27
-$0.06
Missouri
$3.41
$3.41
$3.37
-$0.04
Kansas
$3.38
$3.37
$3.36
-$0.01
Ohio
$3.57
$3.57
$3.57
Unchanged
Michigan
$3.63
$3.43
$3.43
Unchanged
Midwest Average
$3.56
$3.49
$3.47
-2 cents

 

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