CHICAGO (Reuters) – Months after historic floods ravaged the U.S. Midwest, farmers scrambling to harvest their crops face a new headache – finding fuel to dry soaked grains. Normally farmers use propane as fuel for grain dryers to reduce moisture levels in corn crops to ready for sale or to safely store the grain.
But the extraordinarily wet spring delayed planting and a waterlogged fall delayed harvesting. That produced wet crops. And that caused a surge in propane demand among crop farmers, even as livestock producers are buying to keep their barns warm and rural homeowners try to heat their homes. All of that is straining aging infrastructure used to deliver that fuel. And keeping people and animals warm takes precedence as compared to grain drying.
It adds to the season of woe for Midwestern farm communities, which are contending with increasing bankruptcy rates, slumping farm incomes and lackluster exports as the U.S.-China trade war drags on.
“Everyone is trying to harvest all at the same time, and they need more propane to keep their dryers running,” said Dan Smith, owner of Smith Propane & Lube Inc in Lake Crystal, Minnesota. “I’ve got two trucks from farmers parked outside, waiting.”
At the time his tanks were dry. His drivers were scattered across the Midwest, with one as far as Kansas, in search of fuel. He’s not alone. Propane suppliers in Wisconsin, Minnesota and Iowa are experiencing increased demand from out-of-state fuel sellers, trade groups stated.
Propane prices surged by about 20 percent in October as sellers scrambled to find enough fuel across the Midwest to satisfy customers. Propane for delivery at the Conway hub in Kansas soared to 51 cents a gallon the first week of November, from 37.5 cents a month earlier.
Much of the U.S. Corn Belt relies on a fragmented supply network of pipelines, trains and trucks to keep pace with propane demand. That infrastructure this year has not been able to keep pace with the unexpected spike in demand.
By this time of year three-fourths of the corn crop has typically been harvested; the fuel demand would have been staggered. But only 52 percent of the corn crop was harvested by the first week of November, according to federal data, as farmers were inundated with wet fields.
The longer those crops sit out in the field or are stored wet in a storage bin, the greater the risk of them being damaged and facing steep discounts from buyers.
“Because the corn is wetter we have to dry it all night to try to keep up,” said Shane Goplin, 45, who farms 1,700 acres of corn in Trempealeau County, Wisconsin.
He’s been sleeping inside a shed next to his corn dryer to keep an eye on the machine and ensure not a drop of fuel is wasted.
“The problem is everyone is harvesting wet corn,” he said.
The supply crunch prompted the governors of Iowa, Minnesota, North Dakota and Wisconsin to recently sign executive orders temporarily lifting regulations restricting what hours commercial drivers can transport propane, gasoline and diesel fuel to retail suppliers. It’s an attempt to transport fuel to farmers and farm cooperatives as fast as possible.
The unexpectedly increased demand resulted in two propane terminals in Iowa on ONEOK’s North System to have temporary inventory outages recently, company spokesman Brad Borror said in a statement. The outages lasted less than 24 hours, he said, and the company was working diligently to timely deliver propane to the region.
As of the first week in November overall U.S. propane inventories were 99.8 million barrels, 20 percent more than at this time a year ago. But most of that growth is in the U.S. Gulf Coast.
In the Midwest stocks were 3.3 percent less than the previous year, according to U.S. Energy Department figures. Pipeline infrastructure is not robust enough to transport those barrels to the Corn Belt quickly enough.
Deb Grooms, chief executive of the Iowa Propane Gas Association, said supply is not the problem. It’s demand and existing infrastructure.
“We are now in a world where the pipeline, which hasn’t been updated, was fine in the 1960s,” she said. “The system hasn’t kept up. We’re seeing a perfect storm.”