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Got grain-drying LP worries? Supply is there, it just may cost you more

Agriculture.com Staff 11/06/2009 @ 2:38pm

Combines are running full-bore around the Midwest in an effort to make up for one of the slowest fall harvest seasons in history.

But, that doesn't mean all the rough water's behind farmers. The corn and soybeans are being put away into storage on the wet side, putting a premium on a good grain drying system and the fuel needed to power it.

The latter ingredient could become an issue for farmers as the dryers run this fall. Already, supplies of propane -- the primary grain dryer fuel in the Midwest -- are starting to come into skyrocketing demand. According to the U.S. Energy Information Administration (EIA), the nation's midsection is the epicenter of the run of propane demand, accounting for the largest portion of the 1.4-million-barrel decline in the last week, EIA numbers show (current national stocks total just under 70 million barrels nationwide).

"The largest regional decline of 0.9 million barrels occurred in the Midwest, reflecting crop-drying demand," according to an EIA report this week. See more of EIA's latest propane price and supply update.

But, it's not a shortage, says Mark Britten, energy department manager for Heart of Iowa Cooperative at Roland, Iowa. The supplies are there -- it's just that demand is spiking seemingly all at once in the Corn Belt, making it tough to get adequate LP "shoved through the pipeline.

"Terminals can only hold so much. With the timing of the harvest and all the grain dryer demand being so huge, it's coming all at one time, so some suppliers are going on allocation where they're only allotted so many loads per day," Britten adds. "But, as the industry sits, we're not talking about any shortages whatsoever."

Because of the run of demand in the LP market for grain drying and the limited capacity for transport, suppliers are faced with two basic options for meeting demand. First, they can seek out other more geographically distant LP sources or face delays in securing local sources, Britten says. For example, Britten says suppliers in Iowa are looking as far away as Kansas to meet local demand.

Or, in his specific case, Britten says trucks face huge wait times to get a 9,000-gallon transport load filled at a Des Moines, Iowa, terminal. "On Monday, the time it was taking to get 1 transport in Ogden [Iowa] was roughly 11 hours," Britten told Agriculture Online on Friday.

The jump in LP demand is trickling down to the farmer pretty quickly. It's creating the need for cooperatives and other suppliers to get creative to meet their customers' LP needs, if they're able to at all. Some farmers and Agriculture.com Crop Talk members say their supply orders will be fulfilled, though some at an additional cost.

"Our local co-op in southern Minnesota is telling us that they will be rationing our LP supply starting tomorrow," Crop Talk member long_run said Thursday, adding that he's burning around 1,000 gallons per day to dry his grain right now. "Word is we will be getting 10% of our daily needs. All we need is another hurdle this fall!!"

Though while long_run is facing a possible cutback in his LP supplies, others say their suppliers are tapping other supplies to keep orders filled. Though he's going to have to pay more to keep his tanks filled, Crop Talk member idalivered says he's received word his supply needs would be met.

"Our supplier sent an e-mail stating that they had secured supplies from some place in Kansas, but would probably add a transportation surcharge," he says. "I'm glad they have some options. They also stated that they would be taking no new customers to ensure supply to current ones."

Britten says at his location at Roland, Iowa, location, he'll be able to fill all customer LP orders. That's partly because Heart of Iowa was able to fill its allocation during the typical "summer fill program" time. The amount of propane procured from June to August dictates how much a supplier is allotted during times of high demand.

"If you don't pull any during June-August, you won't have any allocation later on. It's important to pull your gallons during the summer," Britten says. "June-August, in the propane industry, is the summer-fill program, where suppliers fill the end users' storage tanks during the summer months so they can go into the use season with full tanks."

Years like 2009, Britten adds, underscore the importance of year-round LP procurement. "This is something we haven't seen for a lot of years. These are times we prepared for but never hoped it would happen," he says.

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Combines are running full-bore around the Midwest in an effort to make up for one of the slowest fall harvest seasons in history.

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