Fuels Report | Delivery Crisis Puts the 'Pain' in Propane

Posted on 11/01/2019 1:12 PM

 

This week propane supplies are in focus. Well, maybe not supplies... its the deliveries that are raising eyebrows. Farmers in Iowa, South Dakota, Minnesota and Wisconsin have all checked in saying their local retailers will only be filling orders to 40 or 50% for the time being. We wrote up what we could find yesterday for your Inputs Monitor (read it here). The article found Minnesota and Wisconsin had each declared states of energy emergency, granting Hours of Service Waivers for drivers delivering propane. Later that day, Iowa Governor Kim Reynolds added Iowa to that list.

We had expected high demand for harvest propane as the crop comes in wet. Seasonally, confinement operators have turned up thermostats and residential demand has responded to falling Midwestern temperatures. But all three of those demand sources pop up the same time every year, and according to the U.S. Energy Information Administration, U.S. propane supplies are near a five-year average high (see chart from EIA.gov at right).EIA propane supply chart

A panelist on AgriTalk's Friday Farmer Forum and Iowa farmer said he smells a rat. Ag news sources including your Inputs Monitor have been warning about a propane supply shock at harvest since at least mid-summer, but propane production appeared to have been up to the task of providing uninterrupted service in farm country. That has not proven to the be case. The panelist admitted he was steering dangerously close to the world of tinfoil-hat theories but wondered if the supply squeeze was somehow related to the ongoing fight between ethanol producers and big oil. He called the shortages, "ethanol revenge."

A listener from central Iowa tweeted in response, "Its an infrastructure issue on LP system like anhydrous ammonia in the spring. Old technology with no recent upgrades." That is an astute observation; one which the Chronicle Times in Cherokee, Iowa supports in an article from this morning. The Times asked Dan Vander Griend, President of Sioux Tank Lines Inc. in Alton, Iowa about potential harvest period shortages. Vander Griend said, "I wouldn’t say it’s a shortage. I would say that the pipelines aren’t able to get propane to where we need it. The pipeline diameters are too small. I think there’s plenty of propane in the country.”

In fact, Vander Griend continued, "It’s very seldom that we haven’t had that shortage issue to deal with. Most of the issue we have is no places to load. When we do load, the storage tanks are the same as what they were 35 years ago when delivery terminals were built. So what happens is we run hard for a couple of days pulling out loads and MAPCO’s Sanborn terminal inventory drops. Then, when we pull in there to load, whatever is coming north up through the pipeline is all we can get, one load at a time.”

I found this article to be very informative and a good read. Click here and have a look for yourself. Whether you agree the shortages are part of big oil's sour grapes over ethanol or the nation's pipeline capacity is in desperate need of updates, the fact remains propane is in short supply and for some of the nation's farmers, deliveries are hard to come by.

As a personal suggestion from your Editor, please be kind to delivery truck drivers when you see them. This is not a problem they created and no amount of hassling will give them the power to change the situation. Remember, in Iowa, Minnesota and Wisconsin, these drivers are now cleared to work long hours and given the time of year, it is likely they will be doing exactly that. 2019 has been a year of hardships and consternation. I hope you will join me in working to avoid adding unfruitful angst and negativity to this year's series of troubling events. Hang in there!farm diesel pruice chart

Farm Diesel --

  • Our regional average farm diesel price firmed 3 cents on the week to $2.42 which compares to $2.75 the same week last year.
  • Indiana led to the upside firming 18 cents as Michigan gained a dime per gallon. Minnesota softened 3 cents and Iowa diesel fell 2 cents per gallon.
  • According to EIA, national distillate stocks fell 1 million barrels in the week ended October 25, now 6.6 million barrels below the same week last year and below the bottom end of the five-year average supply range.
  • December heating oil futures as of mid-day Friday are up 3 cents on the day at $1.90 3/4 with deferred contracts softening from there. This marks a decline from last week even as the December contract moves forward to take the lead-contract spot.
  • We are 50% filled on harvest diesel needs and are comfortable hand-to-mouth for the time being.

propane price chart

Propane --

  • Our regional average propane price is unchanged at $1.18 this week which compares to $1.31 during the same week in 2018.
  • Iowa led gains firming 8 cents to a statewide average of $1.11 as Minnesota firmed 2 cents per gallon to $1.15. North Dakota led to the downside falling 19 cents as Ohio softened 4 cents per gallon.
  • According to EIA, national propane stocks fell 137,000 barrels in the week ended October 25 to a level 16.832 million gallons above the same time last year.
  • As Mentioned above, propane supplies are crimping deliveries at this crucial hour. We strongly suggest propane users contact their preferred retailer for details on the local supply situation.

Fuel
10/14/19
10/21/19
Week-over Change
Current Week
Fuel
Farm Diesel
$2.36
$2.39
+3 cents
$2.42
Farm Diesel
LP
$1.15
$1.18
Unchanged
$1.18
LP

 

 

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