DAVENPORT, Iowa – U.S. fuel and fertilizer prices will continue to climb this fall, but for different reasons, according to industry experts.

“As far as the outlook for fuel prices, every indication is that prices will continue to go up, but for different reasons between diesel and propane,” said Jean Bowen, River Valley Cooperative energy business lead in Davenport. “Starting with propane, the U.S. has seen far more exports to the Far East than we have seen historically.

“They had a very cold winter and the demand was exceptional (19 percent greater than 2020),” she added. “This, coupled with the weak dollar, provided for the perfect storm to see record levels of exports. These exports are not allowing for the typical builds in the U.S. inventory.”

She said the U.S. inventory has consistently been below five-year averages, and currently is nearly 26 percent below last year at this point, and is 18 percent below the five-year average.

“All of this is driving propane pricing to levels we typically don’t see in the summer,” she said. “While many were expecting the normal pullback in propane pricing, this hasn’t occurred. Fall propane prices continue to go up as the concern for inventory builds lingers on.

“Many analysts are reporting that most likely, there will be supply concerns as we come into our peak propane season,” she added. “In summary, if you are in the propane market, expect to pay significantly more than you did last year.”

In addition, she said U.S. diesel prices continue to rapidly change due to the pandemic.

“After the COVID-19 crisis last year, we saw crude markets plummet as demand dropped significantly, and supply built to high levels,” she said. “We all recall crude prices falling to levels we haven’t seen in many years in April 2020. Since then, in the span of six months, we have seen dramatic increases, much like all other commodity markets.

“Overall, the sentiment is that crude pricing will be propped up by OPEC + (The Organization of the Petroleum Exporting Countries) decisions to control production due to COVID-19 demand reduction, and U.S. production being constrained by returning cash to shareholders versus spending to bring rigs back online,” she added.

Chad Hart, Iowa State University professor of agricultural economics and crop markets specialist, said the U.S. energy markets are indicating current prices will likely hold through harvest.

“Diesel futures are flat from now until deep (into) 2022, with similar patterns in the ethanol and gasoline markets,” he said. “Similarly, fertilizer futures are doing the same: relatively flat through the spring, with decreasing slightly as we look into 2022, and urea increasing slightly.

“Both markets (energy and fertilizer) have already incorporated stronger demand as we look to the 2021 harvest, and 2022 growing season,” he added. “Given that the cost increases are already baked into futures prices for both energy and fertilizer, farmers’ best bets for cost control are more related to ‘right’ sizing their input use for their farm, rather than capturing lower costs per unit (lower energy/fertilizer prices).”

Barry Ward, Ohio State University agricultural economist, said, “The crop margin outlook for this year is decidedly different from where we were last year at this time.

“Factors affecting both supply and demand have driven commodity crop prices much higher over the last 12 months and the result is a positive margin outlook for 2021 commodity crops,” he said. “In spite of higher fertilizer, fuel and insurance costs among others, there is a good profit outlook for 2021.”

Regarding the overall U.S. market trend, said Mary Harrington, Landus Cooperative communications and marketing lead in Ames, Iowa. “We have reached some ceiling prices on phosphate and potash, but the downside is minimal to create real savings on the farm.

“Current retail prices are lagging what has happened in the wholesale market, and farmers really need to look at locking in fall dry needs as soon as they can,” she said.

Andrew P. Griffith, University of Tennessee associate professor of agricultural economics, said he’s not pricing fertilizer right now.

“That does not mean prices cannot go up, but the way prices have begun to plateau makes me think we will see softer prices in the spring than what we are seeing right now,” he said.

He added, “I would buy fuel hand to mouth right now until I see a good dip in the market. I would then fill up every fuel tank I have. Our current administration will do everything they can to keep fuel prices high.”

According to a recent University of Illinois estimates analysis, fertilizer costs for 2022 will likely be well above average, with much of the overall cost level, depending on fertilizer prices moving forward, as well as farmer behavior.

“History suggests that fertilizer prices can change rapidly, likely bringing modifications to fertilizer cost projections,” the analysis said.