How to Manage Risk of Rising Diesel Fuel Prices
January 5, 2024
Rising input costs are a major concern for farmers and ranchers and their ability to be profitable. And a major input cost these days is the price of diesel fuel. However, Jace McCurry, Certified Energy Specialist for Mountain View Co-Op in Great Falls, MT says that buying fuel in bulk is a way to help manage the risk of rising prices.
"One of the unique things that we do here at Mountain View Co-Op is our bulk fuel contracting," said McCurry. "Essentially you're locking in a certain amount of gallons and price for next year, and you're combating those market sways so you're not having to deal with those. Producers have a million things to worry about every day so this kind of knocks that out and gets it done. But they know what they're paying for fuel. They know how much they're getting, and that way they're secure in their purchasing."
He says that when it comes to following the energy market, farmers and ranchers really should be paying attention to heating oil versus crude oil prices when it comes to the market driver of diesel fuel.
"On the off chance that they do look at the fuel markets, a lot of them tend to look at crude, and once crude is refined into diesel and gas, it's treated as a different commodity," said McCurry. "It's traded on highs and lows, supply and demand. I've seen it on days where crude is $4 up. But heating oil which is where diesel is traded is $0.15 down. So, if you really want to see what the fuel markets are doing, watch that heating oil compared to the crude."
He says everything that happens geopolitically overseas can affect us over here as fear still drives the market more than anything. So, if destabilization somewhere else happens, it really does affect us locally here because of traded markets, whether it be heating oil, gasoline or crude, it's affected globally.
Source: Western Ag Network
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