What is in this article?:
• If you’re buying for the spring market, it makes sense to buy most of your diesel during February.
• A large share of U.S. fertilizer needs continues to be imported and that makes it difficult to predict what prices will do in the future.
• Interest rates continue to be low, so borrowing, if you can get money, shouldn’t be a problem. The issue is whether or not your bank is loaning money.
Stocks above typical average
Commercial oil stocks are above the typical average, so oil stocks are available if we need it, and if there’s a big demand for oil again, he says. “Even though we’re cutting back here in the United States, China is using more oil, which is helping to keep prices up.”
Gas and diesel prices are seasonal, says Ibendahl, with certain times being better for buying than others.
“You would think gas prices would be higher in the summer because of more people driving and taking vacations, so you expect a higher demand for gas in the summer, with prices going lower in the wintertime, and that’s certainly the case. Prices start climbing in May and stay high through the fall.”
But, he says, diesel fuel is a different situation. “I used to argue that because diesel fuel and fuel oil were similar products, diesel prices should be highest in the winter because people are using more home heating oil. But that isn’t the case, because diesel prices peak in the summer along with gas prices, but it’s a different kind of peak. There’s also a peak in the spring and in the fall. That shows a fundamental shift in how the diesel market works now. It’s not so much now that heating oil is driving the market, as it is that the construction side is driving things.”
This is bad for farmers, says Ibendahl, because they need fuel in the spring, in May or March, and then in the fall for harvest, during October through November, which corresponds with when diesel rates are highest.
“I tell farmers not to wait until the last minute to buy their fuel, because they’ll probably be paying the highest price if they do that.”
For spring planting, it’s an easy decision, he says, since the lowest price comes in February.
“So if you’re buying for the spring market, it makes sense to buy most of your diesel during February. But buying in February for fall use probably wouldn’t be your best option unless you have a really cheap cost of capital. Somewhere at about July might be the best time to buy for fall use.”
As for predicting the cost of natural gas, since about 2009, variations have been consistent, all within a range of $5, says Ibendahl. Before this time, however, the natural gas market was very volatile. Natural gas reserves that have resulted from new mining technology, especially in the northeastern U.S., could solve any natural gas problems for a long time to come, he says.
But, he adds, these discoveries came late for agriculture because a lot of our fertilizer production now has moved out of the country.