Jason Schwantz, senior vice president of energy with CHS, says he has a favorable outlook for diesel prices into the fall for two reasons. One is that refineries have been running at “historical highs” increasing supply. The other is that a weaker economy is keeping diesel demand stagnant, meaning the supply stays high.
Schwantz explains that demand has been stagnant as both the world and U.S. economies have slowed down. High interest rates are slowing the housing market and business growth, which puts a cap on field demand.
Meanwhile, the supply chain is filling up with diesel. Even though the U.S. has not gained the million barrels of capacity lost during the COVID-19 pandemic, investments are bolstering existing facilities to improve production. Renewable diesel made from soybean oil has also filled the void that COVID-19 created.
What could change? Diesel prices could rise if this crop is big and comes on fast with this warm weather, Schwantz says. Hurricane season in the Gulf of Mexico could also disrupt refineries.
Even when diesel prices are favorable, growers can still take action to protect their bottom line from potential price hikes. If you like the price where it’s at, buy it, Schwantz says.
