Farm Diesel Worth a Look Here & There

Farm Diesel has fallen along with retail gasoline and highway diesel as WTI crude moves lower, ethanol demand is up, and gasoline stocks are strong. But the distillate supply, one of the main drivers of farm diesel pricing, is a little on the low side and a good hard cold snap could easily send prices higher.

Year-on-year we see farm diesel rise and fall seasonally and this time of year generally has prices moving modestly lower. This year we expect retail prices will weigh on farm diesel prices and limit upside risk here. But the month of October posted some declines in farm diesel that are worth a look and may present an opportunity not only to top-off here at mid-harvest, but also to hedge a portion of spring needs at current pricing.

As with nutrient, some states have long since bounced. But others are just hitting our go-zone, including farm diesel. The table below indicates where the farm diesel deals are, and while I’m pulling back from a full-on alert, the price is right in the states listed in the table below for a top-off and short hedge for spring farm diesel.

This week farm diesel fell 1 3/4 cents/gallon to a regionwide average of $3.45 according to Inputs Monitor data.

According to EIA, so far this winter heating season -- started Oct. 1 -- has been 5 degrees cooler than the year before and 1.9 degrees cooler than the 30-year average. Pressure from home heat will hold sway over farm diesel pricing and the distillate supply -- currently 4.8 million barrels above last year -- is at the very low end of the five year average.

A cold snap and supply crunch on home heat could inflate farm diesel pricing in a hurry so we advise growers in the states in the table above to contact preferred suppliers and look to lay-in a little ruby red to finish up harvest and to hedge a portion against spring.

Distillate chart from EIA.