Propane logjam reaching crisis stage on some farms
The propane situation is getting serious in farm country. Supply shortages, spiking prices, and extreme winter weather are combining to create a situation that's now seen threatening some livestock's survival, among other serious implications for farmers in the hardest-hit areas.
The situation started before the mercury started dipping well below normal as it has in the last month in points from the U.S.-Canada border to the deep South. Logistical and weather problems as far back as last fall prevented the necessary liquid propane (LP) supplies from reaching terminals around the Midwest, according to a report from U.S. Energy Information Administration policy specialist T. Mason Hamilton.
"After the harvest, logistical problems prevented the region from fully replenishing inventories before the onset of winter. The Upper Midwest is supplied with propane by pipelines flowing north from Conway [Kansas] (home to 30% of the nation's propane storage), the Cochin Pipeline coming south from Canada, and from rail deliveries," he says. "The Cochin Pipeline, which delivers ethane and propane from Canada to the upper Midwest, was out of service for maintenance from late November to December 20 and unavailable to deliver supplies. Rail transportation disruptions, both due to weather and other factors, curtailed deliveries from Mont Belvieu and Conway, as well as from Canada."
Flash forward a few weeks to the onset of the devastating cold that's hit much of farm country, and the story gets dire quickly. Prices at Conway, Kansas, have "spiked far above the Gulf Coast spot price at Mont Belvieu, Texas," Hamilton says, and that's compounded the earlier tight-supply scenario.
"The high propane prices in the Midwest are the result of both increased demand for crop drying in November and increased demand for space heating in the current cold weather," he adds. "A late 2013 corn harvest, along with cold, wet weather, resulted in strong demand for propane at distribution terminals in the upper Midwest. For the week ending November 1, 2013, Midwest propane inventories dropped more than 2 million barrels, the largest single-week stock draw in any November since 1993. This demand prompted a strong upward price response, and propane at Conway moved to a 3-cent-per-gallon (gal) premium over Mont Belvieu during the first week of November, the first such premium in almost three years."
Image courtesy U.S. EIA. See more.
Space heating in homes is one thing; keeping livestock barns warm is a monstrous task in comparison, and it's starting to cause grave concerns, especially for poultry and hog farmers.