OMAHA (DTN) -- When Jamin Ringger, who farms near Gridley, Illinois, went to lock in his propane needs for this fall, he found the price higher than in past years.
He estimated the propane he needs to dry crops this fall cost around 30 to 40 cents more per gallon than last year; he also uses propane for his hog confinement operation.
"Price has been higher than we normally would pay this time of year, but everything has gone up in price," Ringger noted.
In Howesville, Indiana, farmer Mike Cooprider also faced higher prices. He said when he began to fill his propane tanks for the 2020 crop drying season last summer, his cost was $0.50 per gallon. This summer, as he filled the tanks for the 2021 crop drying season, the price was $0.90/gal.
Cooprider recently completed a 10,000-gallon propane storage expansion project for his operation and filled it up. The price for propane this time climbed to $1.30/gal.
"Hopefully we don't have much kernel moisture to remove this year with the earlier planting season," Cooprider said.
BUY PROPANE EARLY
Cooprider and Ringger found out what other farmers are learning: propane prices are going up.
On Tuesday, the Iowa Department of Agriculture and Land Stewardship advised farmers to evaluate how much propane they will need for both grain drying and heating this fall and winter.
Iowa Secretary of Agriculture Mike Naig said in a news release propane users should anticipate and suppliers should make plans to accommodate propane demands this fall (https://iowaagriculture.gov/…).
"It's important for farmers and rural residents to start evaluating their propane needs earlier and get contracts in place with their suppliers now," Naig said. "I also encourage farmers to take advantage of early booking discounts and top off their propane tanks before harvest begins."
HIGHER CRUDE PRICES INFLUENCE PROPANE
There are multiple factors pushing propane prices up, including higher crude oil prices, according to DTN Energy Editor, Product Manager Brian Milne.
Propane typically follows the price of West Texas Intermediate (WTI), either strengthening or weakening against this U.S. crude oil benchmark. WTI futures reached a nearly seven-year high in the mid-$70s per barrel in July and are trading in the $60 range in late August, Milne said.
Propane prices in Conway and Bushton, Kansas, which serve as price benchmarks for the Midwest during the crop drying season, are at eight-year highs for the season, with wholesale pricing for bulk purchases averaging just below $1.20/gallon. This price is likely to move higher, Milne said.
"When considering year-round pricing, Kansas prices were higher in February during Winter Storm Uri, when they topped out in the upper $1.80s/gallon," Milne said.
INCREASED PROPANE EXPORTS
Increasing propane exports are another reason for higher propane prices, Milne explained.
Exports averaged 1.2 million barrels per day (bpd) through most of August, more than 100,000 bpd above the previous year, according to data from the Energy Information Administration (EIA). Propane exports from the U.S. to primarily the Asian markets have gotten stronger as the pandemic progresses.
U.S. propane exports grew annually by 15.7% in 2019 and 15.2% in 2020. This trend is continuing in 2021 as it runs 7.6% above the 2020 pace this year through late August.
Because of increasing exports, propane stocks were 24% below a year ago in late August, according to EIA. The restocking pace hasn't kept up with the seasonal pattern, which could lead to further tightness during the peak demand season in winter.
This especially affects certain regions: Federal data shows 42% of U.S. homes heated by propane are in the Midwest.
Milne said in addition to foreign buyers' strong pull from the domestic supply, there is a growing use of propane as a petrochemical feedstock. This is slowing the restocking pace of propane.
"Increased demand for propane use as a heating source is to be expected after the relatively warm 2020-21," he said. "Combined with exports and increased petrochemical demand, propane consumption during the upcoming winter season is expected to be 1.5% above the 10-year average."
DROUGHT AFFECTS GRAIN DRYING NEEDS
The silver lining to the severe drought gripping the Northern Plains is it might help the propane supply situation, especially in some areas. Lower yields mean less grain needs to be dried, which means less propane is used.
While the propane supply is not quite as high as it has been in recent years, there appears to be plenty of supply for crop drying this fall, said Michael Newland, director of Agriculture Business Development at the Propane Education and Research Council.
Newland told DTN it appears there could be less grain drying necessary in some locations.
Crop drying demand across the entire Corn Belt is still expected to be close to normal. While central parts of the Corn Belt could see above-average crops, areas of the Northern Plains could see well-below average crops. There are some areas of this region which could still see decent yields, but the overall bushels needing to be dried will most likely be less, he said.
"I think in Illinois and east it will be an average drying year, but it is not going to be like the 2019 season, which saw much crop drying," Newland said.
However, there should be some bushels to dry in central Illinois this fall. The region saw pretty consistent moisture this growing season and yields appear to be above average.
As for meeting his needs, "The (propane) supply does seem good," Ringger noted for his area of Illinois.
Despite the outlook for plenty of available propane supplies for crop drying this fall, farmers are being encouraged to be proactive in buying their propane needs.
COLD WEATHER WILDCARD
Looking beyond the fall crop drying season, one factor which could alter the relatively positive propane outlook would be a cold start to winter.
Newland said if this occurs, it would mean crop drying would compete with home heating needs. This increased demand would be bad news for grain drying both in terms of available supply and also likely higher prices.
The good news is most forecasters are calling for typical fall weather in the coming months and there does not appear to be any cold weather looking out over the next couple of months, he said.
DTN Ag Meteorologist John Baranick said as far as temperatures go this fall, the DTN forecast is calling for above-normal temperatures each month from September through November for the majority of the country. That doesn't mean cold events won't happen, but the warm events should trump the cold ones, especially through October. November could end up being closer to normal for temperatures in some areas, Baranick said.
Russ Quinn can be reached at firstname.lastname@example.org
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