Fuel Outlook: Higher Year Over Year

October 18, 2017 09:05 AM
 
Fuel Outlook: Higher Year Over Year

Since the vast majority of farmers don’t use horses for power anymore fuel has become an essential input—one with perhaps the most price volatility outside of ag’s influence. Look for opportunities in the off season to save on farm diesel and propane.

“The big thing is it does seem like crude oil supplies globally are beginning to rebalance,” says Davis Michaelsen, Pro Farmer’s Inputs Monitor editor. “Which will pump up farm diesel a little, but I don’t see a huge crazy jump in crude or heating oil futures.”

Currently farm diesel is averaging $2.16 per gallon, 13% higher than last year’s low of $1.87. It’s still low compared to recent years, but leveled off of the extreme lows farmers experienced last year. Watch for farm diesel to potentially lower in coming months.

“Usually we see diesel prices come down just ahead of the first of the year as harvest is wrapping up,” Michaelsen says. “Look for opportunity there, but I don’t see us getting below $2.00.”

Crude oil is at about $50 per barrel right now, a pattern Michaelsen says he expects to continue. He expects diesel to top out at $2.25 and drop to around $2.10 at a low. Right now diesel is in high demand with harvest, so hold off on buying until winter.

Propane took a strong jump up thanks in part to higher-than-normal demand as crops come in wetter than expected. In addition, export demand for propane is strong.

“We’re 30 cents per gallon over a year ago at $1.32, which is fairly significant,” Michaelsen says. “Prices are well above last year and well above my projections for a ‘normal’ year.”

If full harvest demand hasn’t been realized farmers could see propane jump another dime per gallon. Watch for a potential dip sometime this winter and act quickly—that’s peak demand season and if it does come down it doesn’t last long.

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