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Good News for Farm Diesel Prices

Good News for Farm Diesel Prices

Purdue University economist says prices could stay stable into the summer, provided there are no outside surprises.

The price of fuel has become a significant planning issue, but it appears that for 2012 there may be some help - for the time being. Wally Tyner, an ag and energy economist at Purdue University, says as long as market conditions stay as they are now, fuel prices will likely remain stable or slide a bit lower.

That creates a fuel buying opportunity for farmers looking to lock in prices before fall harvest, and even into next spring. But Tyner does caution that global instability and disruptions in supply could force prices back up. It's the political situation in the Middle East and U.S. relations with Iran that play a large part in your farm's fuel bill.

BARRING SURPRISES: Purdue economist says prices could stay stable into the summer, provided there are not surprises.

"Any disturbance in the Middle East or heightening tensions with Iran could move crude oil up," Tyner says. And he notes that would push diesel prices up.

However, there are factors that impact fuel demand that will weigh on prices too. Sluggish economic growth and an increase in crude oil production along with higher-than-normal crude stocks may bring prices lower. The price of crude, and the resulting fuel price, hinge readily on the supply picture.

Recent developments in the economic crisis in Greece and signs of a slowdown in China's economy could be important to summer fuel prices as well.

Recently, crude oil production worldwide has increased beyond global demand, a situation that would drive fuel prices down. As production rises, crude oil stocks build to a above-normal levels, which also could cause oil prices to slide. Tyner says it's difficult to say how many of these factors will play out in the months to come, but they are key determinants to the price of fuel for the future.

Monitoring fuel prices closely into the summer could offer you buying opportunities that can help cut your harvest calls in the fall.

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