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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.
"The LP shortage has been in the news, but it is a crisis here. Poultry requires warm temps to survive. The LP was being delivered in small amounts, and then a few days ago, the contracts were canceled," says Agriculture.com Women in Ag Talk senior contributor and Indiana farmer turkey feather, who adds that the LP price rose to $6.00 a gallon in her area compared to the $1.59-per-gallon contract price because of its scarcity. "The companies could not get LP and certainly not at the contracted price. The price is now almost five times the contracted price and rising. Here, barn tanks got some LP that was trucked in from two states away, but it takes a lot with these winds and temps. We do not know what is ahead. Disaster is a real possibility."
The dire situation could extend well beyond the lifespan of the cold snap and LP supply issue this winter. Just like the drought of 2012 caused premature cattle culls because of a shortage of feedstocks and water, the LP shortage could have similar implications for the poultry industry, some farmers say.
"I think you will see your flocks euthanized at the hatchery, or the hatchery itself cutting back or hatching, if this crisis isn't averted in some meaningful way," says Women in Ag Talk esteemed adviser Kay/NC. "I think we can make it to spring, but I would like to know if it is rare now, so we could manage closer to the bone."
Without either price or supply relief in the near future, Women in Ag Talk's turkey feather says the entire turkey industry -- not just her farm -- will face dire straits.
"It is a real crisis with so many people dependent on the industry for jobs and income. Truck drivers, litter providers, feed mill employees, grain producers, the processing employees, supervisors," she says. "The list is long. The banks will still expect their payments. The cause for the shortage is being blamed on the companies selling LP overseas and then wet corn this fall that needed huge amounts of propane."
And it's not just on the livestock side; crop farmers speculate continued sky-high LP prices could have some pretty serious implications to the 2014 crop, namely when it comes to yield potential changes stemming from planting shorter-season crops.
"If this ongoing LP gas dilemma pushes into this fall, is it possible for the corn and bean producers to plant an earlier maturing variety that can naturally dry in the field and won't require as much fuel?" asks Agriculture.com Marketing Talk senior adviser Shaggy98.
Corn and soybeans could definitely see changes, but not as much as other crops, adds Marketing Talk senior contributor Wind. "If high LP prices carry deep into this year it will be a game-changer," he says. "There are a lot of greenhouses or high tunnels used to grow early vegetables (tomatoes and more) that are going to have to wait longer to plant or watch their profit go up the pipe."
What's being done? Leaders from industries most affected by the LP shortage and spiking prices are working with lawmakers to ease the supply squeeze, which many say can be done with the right steps. Lara Durben, communications and program director for the Minnesota Turkey Growers Association, says the group's leaders are taking steps toward both short- and long-term solutions. Similar efforts are underway in states like Iowa that have been hit hard by the propane price runup and scarcity.
"Our executive director and leaders are working with Minnesota’s congressional leadership and Governor Mark Dayton to ask President Obama to take specific actions for removing barriers to transportation, delivery, and distribution of propane," Durben says. "The ideal solution would be one that required a key pipeline to give priority to the transportation of excess propane supplies from a terminal in southeast Texas.
"We haven’t yet heard of any growers having to turn down or shut off their heat yet, but it’s been a real possibility in this scenario and we’re working hard to make sure this doesn’t happen," she adds.
At the farm level, livestock farmers can take a few steps to get more out of their heating systems, whether through lighter propane use or a switch to a different heat source, according to Iowa State University ag engineer Jay Harmon.
"Often the first idea for saving heating fuel in hog buildings is to add insulation," Harmon says. "However, ventilation management should actually come first because more than 80% of the heat loss in a swine building is due to improper ventilation."
Harmon also advises considering alternative heating elements, especially for younger animals.
"One common tool to provide a microclimate is a heat mat. Mats have electrical resistance coils, which create a warm and comfortable surface for piglets. Mats are generally provided in the creep area of the farrowing crate with one double-mat being used for two adjacent crates. Mats generally have lower wattage than heat lamps, and are potentially more energy efficient," Harmon adds. "Heat lamps are often used to provide a microclimate for piglets in farrowing barns."
Looking forward, Iowa Department of Agriculture Agricultural Marketing Program manager Harold Hommes says there could be reason to be optimistic about prices falling to more manageable levels.
"Indications are showing that wholesale propane prices may be beginning to fall," he says Monday. "[Between January 23 and January 27,] Retail propane moved from $4.18 to $4.71 or an additional $0.53 higher. Somewhat fewer retailers are limiting quantities than last Thursday. In fact, we have noticed a reversal whereby even qualified customers are asking for only minimal quantities on the assumption that lower values may be coming.
"There seems to be a marked turn of events which are and will bolster supplies to Midwest and northeastern U.S. destinations. The measures also appear to be putting dramatic downward pressure on values."