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Which Way Are Energy Prices Headed? - 30th July 2013

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TheCropSite
Tuesday 30th July 2013.
Sarah Mikesell - TheCropSite Senior Editor

Sarah Mikesell
Senior Editor


5M

Which Way Are Energy Prices Headed?  

Greetings! It was a great weekend here in Chicago that felt more like September than July. And while I always enjoy the fall weather, I’m not quite ready to give up the sun and heat of summer just yet.

This week, I'm going to share more insights from the Wyffels Hybrids Corn Strategies conference.

Jim Wiesemeyer, senior VP, Informa Economics, predicts that by 2016, energy prices in the US are going to fall by 20 to 30 per cent.

He said mega changes are underway in energy that will dramatically impact the business of agriculture - including more output, greater fuel efficiency and alternative energy.

“I believe you’re going to have $65 to $75 a barrel, and we are a little over $100 for Brent Crude right now,” he said. "Regular gas is going to go down to $3/gallon and that’s like an income tax cut.”

Domestic oil use is down 11 per cent from its peak in 2005, and output has gone up 30 per cent since 2008. The impact of this is equal to 4 million barrels of new oil supplies a day. From a corn perspective, that's about a two billion bushel carryover.

Foreign demand for oil is easing, so not only do you have domestic US and world production going up, but US and world consumption is going down, including China.

Around the world, fuel subsidies are shrinking and environmental regulations are rising.

  • Europe and Japan: there are weak auto sales, rising urbanization and weak economies.
  • Canada: oil sands reserves are on the rise.
  • Africa and South America: discovered tremendous offshore deposits that will provide trillions of dollars in revenue.
  • Iraq and Russia: oil production is booming again.

All this translates to big impacts on other sectors. Biofuels will become less competitive, as gas and diesel become cheaper relative to ethanol and biodiesel. Natural gas usage is going to surge and go to the lowest price. Abundant supplies will displace or temper oil use across many industries.

US and China truck fleets are expected to use more liquid natural gas and less diesel. Saudi Arabia is discovering and producing more gas wells so they can free up more for export.

In the future, he expects natural gas to be a key fuel source for farm equipment.

“They’re on the drawing boards and once they get that power figured out, you watch this mega trend for the decades ahead for farm equipment, it’s important,” he said.

This is just bits from my coverage of Jim’s comments on energy, so click here to read the full story, including more on the Renewable Fuels Standard and trade policy.

Have a great week!


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Global Crop Industry News

   United States

Jim Wyckoff's Monday Closing Grains: No Bottom In Sight for Corn
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Grains: Where are the Stops? Monday, July 29
Optimal Weather Contributing to High-yielding Forages
CME: Corn Futures Closed Lower Friday
e3 Sustainable Cotton Program Launched by Bayer CropScience
Grains: Where are the Stops? Friday, July 26
CME: Corn Futures Closed Lower Thursday
Fat Digestibility in Pigs Looks at Oils in Soybeans, Corn Co-products
Jim Wyckoff's Thursday Closing Grains: Bear Market Continues to Roll
Grains: Where are the Stops? Thursday, July 25
CME: Corn Futures Closed Lower Wednesday
Record US Corn Production Expected to Improve Pork Industry Profitability
Higher Than Average Temperatures Cause Concern Across US
Jim Wyckoff's Wednesday Closing Grains: Corn Hits Fresh 2.5-Year Low
Grains: Where are the Stops? Wednesday, July 24
Purdue Economist to Testify on Biofuels Policy
CME: Corn Futures Closed Lower Tuesday
USDA Announces Results for 45th Conservation Reserve Program Sign-Up

   Global

Jim Wyckoff's Morning Report: Markets Mostly Lower
Expert: US Energy Prices to Fall by 20 to 30 Per Cent by 2016
EU-Colombia Trade Agreement in Place
Jim Wyckoff's Morning Report: Markets Firmer Overnight
Kansas State University Awarded $13.7M to Support Sorghum Research in Africa
Jim Wyckoff's Morning Report: Markets Near Steady to Lower Overnight
Jim Wyckoff's Morning Report: Markets Firmer Overnight
Greater EU-China Cooperation in the Field of Agriculture

   Brazil

Brazilian Meat Production to Expand

   Japan

Ag Ministry Announces Results of Testing for GE Wheat

   Algeria

Algeria's Wheat, Barley Production Forecast to Improve in 2013

   Canada

Canada Supports Agriculture Innovation, Competition
Investment in Research for Canada's Canola Sector
Increased Crop Yields Help Improve Phosphorus Balance

   United Kingdom

Who Should Set Food Safety, Health, Welfare Rules in the EU?
Survey Shows A Mixed Picture for UK Crops
€10.5M Call for Food Security and Land-use Research Launched
Rothamsted Research, Syngenta Agree £5M Partnership
BBSRC Welcomes UK Agricultural Technology Strategy

   Ireland

Growers Should Look to Alternative Market Outlets, Says Delany

   China

Chinese Food Prices Affected by Weather

   Ethiopia

Ethiopia Development Organisation Recognised for Cooperative Work

   European Union

Monsanto Focus on Conventional Breeding in Europe
Looking to Genetic Improvements for Sustainable Agriculture

   Russian Federation

Cherkizovo Increases Meat Output

   Chile

Corn Imports from Argentina, Paraguay Up During First Six Months

   Australia

Flooded Farmers Have More Time to Apply for Assistance

   Paraguay

Further Growth of Fuel Market Expected in Coming Years

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