Crop drying outlook: What propane retailers can expect from fall gallon sales

August 20, 2015 By    

What can propane retailers in the Corn Belt expect this fall in terms of gallon sales related to crop drying?

Crop Dryer

This year’s crop is big, and weather conditions should dictate some crop drying this fall.

The U.S. Department of Agriculture (USDA) offered a glimpse upon releasing a monthly crop production update Aug. 12. According to USDA, corn production is forecast at 13.7 billion bushels this year. If realized, this will be the third-largest production on record in the United States.

Farmers produced an estimated 14.2 billion bushels of corn in 2014, making last year a record setter.

The 2015 production forecast for soybeans, like corn, is high yet down from 2014. USDA’s latest forecast calls for 3.92 billion bushels of soybean production this year.

Still, production alone doesn’t dictate the volume of propane farmers use to dry key crops like corn and soybeans. Planting time and weather are fundamental to the propane consumption equation, as well.

According to a mid-May USDA progress report, 85 percent of all corn was planted by May 17. Last year, only 71 percent of corn was reportedly planted by May 17.

Likewise, a higher percentage of all soybeans was in the ground by May 17 this year (45 percent) compared with the same date in 2014 (31 percent).

The early planting minimizes the percentage of crops that will come up late and need time in dryers. This year’s crop is big, though, and weather conditions should dictate some crop drying this fall.

“The weather conditions are going to be similar to last year in terms of the harvest,” says Amanda Townsley, senior adviser of NGLs at Genscape, a firm that produces data and intelligence on the energy market. “Last year we had about 3 million barrels. This year could be similar to that, although with a smaller crop so far, we think 2 million barrels is a reasonable expectation.”

For context, Townsley says a record for barrels consumed related to crop drying occurred in 2009, when farmers demanded about 9 million barrels. About 7 million barrels were demanded two years ago, she adds, when winter supply was disrupted in part because of high crop drying demand.

In terms of fall rain, Joshua Senechal, a Genscape meteorologist, forecasts “close-to-normal” rainfall for the southern half of the Midwest and “below-normal” rainfall for the northern Midwest.

“It looks like September could have the heaviest rain,” Senechal says. “We think the risk’s mainly in the southern Midwest, and that could keep some grain moisture a little bit on the excessive side. Overall, the heaviest rain has tapered off.”

Regardless of this fall’s crop drying conditions, one retailer says the industry has work to do to better serve agriculture.

“If you remember back two years ago, we had a problem with physicals at the hub (Mont Belvieu) and a problem with deliveries from that hub to the destinations,” says Drew Combs, vice president of propane at CHS Inc. “There were plenty of physicals, especially in the fall for the crop dryer, but the problem was getting it to the end user and the infrastructure. That caused a lot of heartburn and pain that fall.”

Combs says some farmers aren’t currently interested in investing in additional storage tanks that would help to alleviate the propane industry’s pain. He says farmers should consider investing, however, because they’re harvesting corn faster than ever.

“Those are the guys we’re working on to get [tanks] right sized,” Combs says.

Perhaps some of those farmers didn’t reinvest because they carried crop drying-specific gallons over from last fall.

“We had a lower crop drying season last year and farmers are well supplied this year from the carryover,” says Allison Tinn, the NGL Americas reporter at Argus Media.

About the Author:

Kevin Yanik is the senior editor of LP Gas Magazine. Contact him at kyanik@northcoastmedia.net or 216-706-3724.

1 Comment on "Crop drying outlook: What propane retailers can expect from fall gallon sales"

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  1. Johnny Otte says:

    Some one should tell Amanda Townsly that two years ago was not so much grain drying, but that our pres. forced the pipeline to switch products that fed that region with Canadian propane