U.S. farmers have had it rough lately, from an extremely wet spring last year to China-U.S. trade wars, and then the coronavirus hit. The farm community could certainly use some positive news.

The coronavirus has caused demand for both gasoline and diesel to greatly diminish. Evidence of this came this spring when daily world oil consumption fell by 30% from 100 barrels a day to slightly more than 70 million barrels. It was just reported that road fuel retail prices in the five largest European economies fell by an average of 20.6% in May due to travel restrictions to slow the spread of coronavirus.

Phase one of the January trade deal had China agree to buy $36.6 billion in U.S. farm goods in 2020, but because of the coronavirus, only $3.35 billion in goods have been purchased so far. Last week, the Chinese government directed state-owned companies to suspend purchases of U.S. corn, soybeans, cotton and pork.

Current stocks of distillate fuel in the U.S. are standing at 174.3 million barrels versus 129.4 million barrels at this same time last year. The chart gives an excellent visual representation of the excess of distillate stocks in the U.S. as they are well above the five-year average (the gray area).

Recently, the energy markets have been able to gain some limited upside momentum as states start easing stay-at-home orders and increasing demand for energy products. OPEC + (OPEC and non-OPEC allies) have a tentative agreement to support a one-month extension of the current level of supply cuts, but nothing has been finalized.

How does all this translate into a bit of good news for U.S. farmers? Well, since late December, the futures price for heating oil has fallen from $2.11 to a low of 58 cents in late April; a drop of $1.53. Since that low, the market has rallied to $1.01.

Looking back over the past six years, diesel fuel prices have never been this low, giving producers the opportunity to lock in some discounted diesel fuel for their fall needs. Farmers can take advantage of locking in a significantly discounted input cost. Crops are in the ground for the most part, and Mother Nature has finally turned up the temperature, giving the Midwest some much-needed growing degree days.

As always, we are never a proponent of contracting 100% of your fuel needs, but work with your local FS representative to establish a plan for your operation.

Bridget Chinowth serves as GROWMARK’s FS senior energy analyst.