Crop drying season presents unique supply challenges for propane marketers

November 21, 2013 By    

Drought-like conditions followed a wet spring this year in the Corn Belt, leading marketers to believe little propane would be needed to dry corn this fall. But cooler, wetter conditions ensued, prompting a tremendous need for propane in the region.

Propane was needed this year like no other, though, because U.S. farmers were on pace for record-setting corn production. According to the United States Department of Agriculture’s (USDA) World Agricultural Supply and Demand Estimates report published Nov. 8, corn production is forecast at 14 billion bushels – up 30 percent from 2012. Harvested acreage was down about 1.9 million acres this year, but a 5.1-bushel-per-acre increase contributed to the record-setter.

Still, pipeline issues stemming from a reversal to the Cochin Pipeline, coupled with the increased demand for propane, put pressure on marketers to secure product for crop drying.

“It’s really frustrating for me as a propane sales and service person that the infrastructure for propane is not expanding along with customer needs,” says Chad Hulstein, who handles propane sales and service for Chandler Coop.

Hulstein, whose company has facilities in Chandler, Edgerton and Slaton, Minn., has historically sourced propane from the Mid-America Pipeline (MAPL) terminal in Sanborn, Iowa. Unfortunately for Chandler Coop, propane was not easy to come by this fall in Sanborn.

“We were only allowed two tanker loads [companywide] from the Sanborn terminal [per day], and Benson, [Minn.], closed down,” says Hulstein, referring to a central Minnesota terminal along the Cochin Pipeline.

Hulstein adds that Chandler Coop typically requires between 10 and 15 tanker loads per day at peak time to meet customer crop drying needs. Because the cooperative was multiple tanker loads short at the pipeline this year, it leaned on Western Coop, a trucking firm that brought propane into Minnesota from as far away as Oklahoma.

“We had a bunch of trucks going down there all the time,” Hulstein says, “but at this time of year you could triple your fleet and it still wouldn’t be enough to meet [the market’s] needs.”

Chandler Coop, which as of Nov. 15 was about 90 percent through crop drying, isn’t the only marketer to truck propane in from a few states away.

“We’ve seen a lot of out-of-state trucks in Missouri,” says Steve Ahrens, executive director of the Missouri Propane Gas Association. “Companies are running here from Illinois to the Dakotas and beyond to serve farmers that need the product.”

According to Mark Leitman, director of business development and marketing at the Propane Education & Research Council (PERC), crop drying should continue to be a major opportunity for the industry. Some acreage that was under conservation for many years is being converted to harvest corn, Leitman says, and acreage that’s historically been used for other crops is now being used to grow corn.

“There have been some pretty significant gains in terms of acreage,” he says.

That said, Leitman points out that propane’s infrastructure has not adapted to agriculture’s new needs. To overcome any infrastructural issues, Leitman says PERC continuously encourages farmers to plan well.

“Our message is pretty consistent,” he says. “We tell farmers to hedge somewhere in the middle of where they think their demand is going to be, and work with the propane marketer.”

Hulstein is delivering his own message to farmers who have questions about Chandler Coop’s ability to supply propane.

“The message is loyalty,” Hulstein says. “I’ve been around here long enough that our customers know me and that if one guy is going to be out, everyone is going to be out. We always have to take care of our tanks first, but I’m going to keep your tanks as full as I can.”

Still, Hulstein has concerns about the future of his business, as well as the industry’s ability to meet agriculture’s future needs.

“I don’t want to take on new customers and supply them with poor service,” Hulstein says. “From this point forward, unless something changes in the infrastructure’s design, I’m not going to take on more corn drying customers.

“Some of these [farmers] are now discussing ways of curing this problem for themselves,” he adds. “Should I have a [bigger] tank? Should I have more tanks? Is it going to be like this every time they want to dry corn?”

Hopefully not, for the industry’s sake.

“The [phrase] ‘the perfect storm’ is probably a little overstated, but you’ve got a lot of corn, and a lot is wet corn,” Ahrens says. “At the same time, there’s a bottleneck in the infrastructure that doesn’t let you pull from some places that you normally would pull from.”

About the Author:

Kevin Yanik was a senior editor at LP Gas Magazine.

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