Propane Availability Becomes a Concern

Posted on 10/31/2019 12:25 PM

 

We have been warning about the potential for a harvest demand surge in propane and even as wintry weather stymies harvest progress, propane supplies are beginning to dwindle in farm country. Anecdotally, I have personally heard from farmers in central Iowa, South Dakota and western Minnesota reporting this week their propane deliveries will be subject to allocation limits. This year's crop, as expected is coming in wet, requiring more time than usual in the dryer. While some growers have been able to either replace or supplement propane use with natural gas, the number one fuel choice in the Midwest for drying grain remains propane.

According to an article in the Brainerd Dispatch, Minnesota Governor Tim Walz declared an emergency Wednesday night, easing restrictions on delivery truck drivers. According to the article, "Walz said when he met with about 50 farmers and agricultural leaders in East Grand Forks on Tuesday that they asked him to help as they were facing a fuel shortage in the area." The farmers and ranchers lamented wet conditions, lagging crop maturity at the first frost and the advent of livestock heating season -- think confinement operations -- have strained local propane supplies and the drivers who transport farm fuels.propane price chart

As on-farm demand skyrockets, drivers are forced to spend more time waiting at terminals to refill trucks, and some terminals are running critically low on supplies. The order from Governor Walz will remain in effect for 30 days.

Madison's The Journal Times reports similar actions in Wisconsin where Governor Tony Evers has also declared a propane and farm fuels related energy emergency. Like the actions taken in Minnesota, Evers' declaration will lift restrictions on the number of hours delivery drivers can operate on the road. Adding to the demand push behind the shortages in Wisconsin is reportedly from companies in Iowa, Illinois and Minnesota as drivers look to refill trucks wherever they can to meet harvest demand. But the shortages are not just due to harvest demand. The Journal Times reports, "Also to blame is the ONEOK propane pipeline, which is experiencing outages and is two weeks behind on deliveries to those states."

The pipeline outage is reminiscent of the winter of 2013-14 when the Kochin Pipeline, which had previously supplied propane to northern states including Wisconsin and Minnesota was taken off-line and switched to delivering effluent to northern fracking operations. That shortage and the ensuing demand push spurred not only Hours of Service Waivers for drivers, but also created a price surge that had some areas pricing propane above $4 per gallon. While our regional average propane price is unchanged on the week at $1.18, supply and demand fundamentals will urge prices higher. We saw that happen very quickly in January 2014.

One Iowa farmer told the Inputs Monitor, "People around here are saying retailers are filling them to 50%." That farmer is in a slightly better spot than others as his operation is one that includes both propane and natural gas. Another from southeast South Dakota told us there are similar allocation policies now in place in that area and in western Minnesota.

Adding to concerns, residential heating demand is likely to increase as cold weather and snow events blow across the central and northern Midwest. As we said in 2014, the cow is out of the barn and propane supplies are already running short, curtailing the amount of propane retailers can allot for each customer. Given drivers are crossing state lines in pursuit of fillups, the shortage is likely to spread.

But there may still be time for your local retailer to send a delivery truck to your operation. We strongly advise you get in touch with your preferred propane retailer and discuss the local supply situation. If there is LP to be had, we recommend farmers and confinement operations top off propane to the brim if possible. Even if your retailer cannot deliver propane immediately, there may be waiting lists forming... that's a list you want to be on whether you need propane now, or expect to need a fill up in the near future.


Editor's note: Pro Farmer members have been one the best early sources of information in situations like these as developments tend to unfold quickly and, often times, quietly. If you have items of note regarding propane availability to communicate to me and to our subscribers, please send an email to dmichaelsen@profarmer.com or send me a tweet or direct message @davismichaelsen on Twitter. Your comments will remain anonymous.

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