If you purchased natural gas or filled your propane tanks at this time last year, your checkbook was probably fatter because you were prepared. It may be time to consider advance purchases again.
In late summer the U.S. Department of Energy's Energy Information Administration projected lowering natural gas prices into this year's end. Reason:
August gas futures prices on the New York Mercantile Exchange hit a 22-month low. Propane prices tend to follow the same price track.
"We're far ahead of the five-year average," says Charles Sanchez, referring to storage build-up by mid-September. Sanchez is an analyst for Gelber and Associates.
While some analysts contend the storage situation will hold off rising prices into late '07, EIA officials predict a more normal price movement into the year-end and in early '07 due to winter heating demand and market speculation.
EIA officials added one disclaimer, however. They realize that if continued blisteringly hot weather persisted through August, it could suck down natural gas supplies and wet the appetite of market speculators.
That appeared to be happening, in fact, in late July and early August. Some of the hottest weather of the summer east of the
Tie to fertilizer
Some industry experts believe the natural gas surplus, if it holds, bodes well for fertilizer prices, especially anhydrous ammonia. Sky-high natural gas prices was one of the reasons fertilizer suppliers gave for $550 per ton—plus anhydrous ammonia a year ago.
When the Northeast's winter didn't turn out as severe as expected and more gas supplies surfaced, anhydrous ammonia prices actually softened into spring. Long-term ag climatologists have yet to offer up a guess on how mild or severe this coming winter season might be.
One key ingredients in long-term forecasts is the El Nino cycle. Jim Newman, retired ag climatologist,
Natural gas is a feedstock for anhydrous ammonia. That's why anhydrous and commercial fertilizer blends containing nitrogen tend to follow natural gas trends when it comes to pricing.
Does that mean back to the good ole' days of $300 per ton anhydrous ammonia? No! But he does believe the drop will be significant.
What happens to anhydrous ammonia prices by spring may once again depend upon how natural gas supplies hold through the winter. Whether now is the time to lock in prices, even if your dealer could do so, is anybody's guess. But the current situation ought to be worth discussing with your local fertilizer supplier, so that you can map out possible scenarios.