While some try to time purchases, others forced to wait for adequate cash
By PATTY MAMULA
For the Capital Press
Diesel fuels agriculture, and over the long run its price keeps rising and falling.
To counteract market fluctuations, farmers try to stock up when the price drops.
"Historically, the price of diesel is lower mid-November to mid-December, the first of January, mid-May to mid-June and sometimes around the end of March, depending on oil refinery turnarounds," said Garry Likens, fuel manager and co-owner of Jerry Brown Petroleum Co. in Eugene, Ore. "Of course, all pricing depends on geopolitical events."
Besides timing, many farmers also buy in bulk.
"Farmers and ranchers have gotten smarter about fuel," he said. "Most have added storage tanks to take advantage when prices are lower."
Many of Likens' customers now have enough storage to get through 75 percent of harvest, the time when they use the most fuel, he said. Depending on the crop, harvest can be anywhere from mid-June to mid-September.
"Most can ride out the largest part of it," Likens said.
His company has been serving farmers in the Willamette Valley for 65 years.
"We watch the market minute-by-minute, so we can give them the best deal," he said.
Around 60 percent of farm customers take on fuel at the first of the year, he said. However, oil companies are getting smarter and keeping their inventories balanced so they don't have such large price drops in the winter, he said. "So we have to be smarter on our end."
He finds that farmers like having their tanks full so they know their fixed costs.
Some choose fixed forward pricing, which allows them to "fix" the price at any given time and receive delivery at a future date.
"Some just float, taking what they need as it goes," he said. "That didn't work this summer, because prices spiked around the Fourth of July."
Some farms buy fuel as cash flow allows.
At Sauvie Island Organics, a community-supported agriculture farm in Portland with 205 full-share members and 417 half-share subscribers, the best time to buy bulk diesel was in the early spring.
"We buy each year in February or March because of cash flow," production manager Scott Latham said. "We presell our vegetables to shareholders as part of our CSA direct-marketing structure and have cash to buy fuel in the spring."
His advice is to buy sooner rather than later.
"As far as I understand, fuel prices will keep climbing until we don't have any left," he said.
The farm uses a 50 percent blend of petroleum-based diesel and biodiesel for its tractors. Latham likes the way the petroleum diesel burns clean when blended with biodiesel.
Sequential Pacific Biodiesel serves Oregon and Washington and produces biodiesel from used cooking oil at its plant in Salem. The current production rate is 500,000 gallons a month.
Some biodiesel prices tend to be more steady that those for petroleum-based product.
"In the last 17 months our prices have changed only twice," Kevin Kuper, biodiesel manager at Sequential, said. Retail runs around $3.99 a gallon and the off-road, non-taxed rate for farmers is around $3.25 to $3.50 a gallon.
In contrast to biodiesel made from virgin soybean or canola oil, Sequential's feedstocks are not affected by rising commodity prices.
"We project prices will remain stable," said Kuper.
Sequential focuses on a 300-mile radius from the plant for collecting used cooking oil and the same 300 miles for distributing the finished biofuel.
"Our biodiesel is a drop-in diesel replacement endorsed by many original equipment manufacturers," Kuper said.
Still, he advised farmers who are considering the switch from petroleum to biodiesel to talk with a representative about biodisel's "three C's" -- cleaning properties, compatibility and cold weather.
Biodiesel blends are common, especially in agriculture. Oregon mandates 5 percent biodiesel in all petroleum-based diesel sold. Popular blends are 20 and 50 percent biodiesel.
"We work with and through established petroleum distributors," said Kuper. "Still, if a farmer wants it delivered, we can make it available at their site."