The Good: Crude oil prices posted their largest drop since the middle of July as a negative Energy Information Agency (EIA) report indicated that US crude oil stocks increased during the past week by 3.3 million barrels to 434.1 million barrels. The drop in prices is the sole bit of good news in the farmer input space, but it really is just a moral victory. Crude oil prices remain at the highest levels since October 2014 and the prospects for a drop back to the July lows appears to be remote.
The Bad: Agriculture doesn’t directly use crude oil, but it does use diesel fuel. The Canadian wholesale prices have come off a little from the recent highs but remain at the highest levels in five years. Hopefully the recent trend for lower prices will continue as the EIA indicated that distillate fuel oil (aka diesel) stocks increased by 2.1 million barrels to hit 127.1 million barrels. U.S. diesel stocks have slowly crept up close to the five year average of 134.5 million barrels for this week. The reason for the increased supplies of diesel are strong refinery margins for diesel production. Barring an extraordinarily cold winter in North America, diesel supplies should remain close to the five year average during the winter heating season. This would help keep diesel prices in line for the spring planting season.
The Ugly: The fertilizer market was dealt another blow today and Russia announced fertilizer quotas of 5.9 million tonnes for nitrogen (urea) and 5.4 million tonnes for MAP and DAP over the next six months. . The restrictions essentially cap exports approximately at one million tonnes lower than projected exports for Russian fertilizer during the November through April period. Russian exports have varied between 10.5 and 12.5 million tonnes over the past five years. This restriction will keep Russian exports to 11.3 million tonnes during the next three months. The fertilizer market is facing high natural gas prices, and export ban from China and limited Russian exports. The news can’t get much worse for farmers for planting the 2022 crop!