Propane supplies continue to be tight in Minnesota and throughout the Corn Belt. The culprit is an unanticipated wet soybean crop and a wet corn crop that has stoked demand for propane used in mechanical grain dryers. The pipelines serving Minnesota got overwhelmed by the surge in demand and started clamping down on terminal liftings. Meanwhile, truckers seeing long lines at the pipelines have been roaming far afield to pick up loads. They have sometimes crossed as many as four state borders to pick up propane.
The demand for propane hit fast and hard. Pipeline terminals saw local stocks quickly drained yet the trucks kept lining up. Once a terminal’s local supply has been exhausted, the truck loading rate slows dramatically. The trucks can be filled only at the rate that propane moves along the line. That’s a slower rate than just filling trucks from local tanks. Minnesota Governor, Tim Pawlenty, was urged by grain industry associations to extend the Hours-of-Service agricultural exemption, to allow propane haulers and retailers the added time to move the product. Unfortunately, extended hours are of no value if there is no product available.
Local propane prices have spiked in some cases while in other cases propane retailers have been forced to absorb the added handling costs. The rise in local propane prices seems to be more a reaction to the tight supply situation and added transportation costs rather than manipulation, say propane distributors. Because lines have been so long at terminals, propane distributors have been sending transport trucks a state or two away to pick up loads. It can be quicker and cheaper in some cases, to send an empty truck from Minnesota to Nebraska, for instance, rather than wait hours in line at a terminal.
But the government is also keeping a heightened watch on things. Acknowledging the market is facing some extreme conditions, Senator Chuck Grassley (R-Iowa) has asked the Federal Trade Commission to watch for signs of anti-competitive behavior among propane suppliers. The National Propane Association, among others has been pressuring suppliers to "pull forward" some of the December contacted supply of propane to meet current demand. Both domestic and Canadian suppliers, however, are reluctant to do that because they say that will only lead to the same supply/demand problem re-emerging around Christmas time. They say it will take until February for the distribution system to get back to equilibrium.
Given the delay to the harvest and the wetness of both the soybean and corn crop, propane dealers are expecting that crop-drying demand will continue well into December.
SOURCE: MGFA Staff Summary
