This week, I asked several farmers if they’ve been forward-pricing or contracting gasoline, diesel fuel and nitrogen fertilizer yet this year. And their answers generally were “No.”
One told me that gasoline prices are up because Uncle Sam is busy refilling his strategic petroleum reserve. And he’s right. According to the Jan. 9 Department of Energy report, Uncle Sam’s 727 million-barrel “tank” had been refilled to 701.9 million barrels of oil. Buying was projected to slow a bit – to 1 million barrels – in February.
That might take the upward edge off the market. But the bigger question is: Do you really think you’re going to buy gasoline and diesel fuel cheaper this spring? The odds are stacked against it.
The best time to contract or buy ahead is in the off season – when nobody else is buying. Come March, that’s going to change.
The Energy Information Administration reports that diesel fuel prices have slipped to the lowest levels since June 13, 2005. This month, diesel fuel averaged $2.29 a gallon across the country. Do you really think it’s going to keep dropping this spring?
And what about nitrogen?
Ammonia and nitrogen fertilizer prices have dropped substantially since last summer’s record levels. More recently, world fertilizer manufacturers have been talking about cutting back production – to reduce supplies!
Agriculture is one of the few U.S. industries with money in the bank. It seem prudent to use some of that cash to protect input prices – now, to limit price risks.
Risks are relative, and like relatives. Some are easier to live with than others.
To me, buying ahead in a weak economy makes savvy business sense. What do you think?
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