10.20.2023 Energy

Oct 24, 2023
I hope harvest is going well for all, it’s been quite a roller coaster on the refined fuel side of things as we’ve seen crazy volatility from a pricing perspective. Basis has been the most popular word used this week as we examine why diesel prices have sky rocketed. In the Midwest we are part of the Group 3 basis market, regardless of the Basis market area pipeline tariffs, terminal tariffs, and supplier margin make up our cost locally. Short and sweet what does it cost to get product up the pipeline to our primary terminal in Mankato is what I just wrote! This week there was a supply disruption in the pipeline coming to us from the south, this had Traders taking advantage- buying in assisting in what on paper appears to be a product supply issue. At the moment there is not a supply issue to speak of, we are able to load the products we need without issue at any of the terminals we choose to lift out of and deliver those products to you per normal harvest routine. Moving forward analysts expect this Basis issue to resolve itself. Other Basis markets sell fuel to Group 3 as it is profitable for them when Basis is high, this should alleviate the potential “supply” issue fairly quickly and return our cost to get product into our primary terminals back to a normal level. For the moment purchase the diesel fuel you need to complete harvest but I would not recommend “stockpiling” product at these values!
Thanks for reading!

Bill Pelzel CRC Energy Manager