| Article in The Wall Street Journal-- Crop Drying
Farmers in the upper Midwest are used to dealing with drought, disease and pests. Now, they are grappling with a different problem: a propane shortage.
Unusually heavy rains have left corn from this year's bumper harvest soggier than normal. Farmers are struggling to acquire enough propane to fuel the giant, oven-like machines that dry corn before it is stored to prevent rot. The dash for the gas has helped send U.S. domestic propane prices to an 18-month high and is slowing the corn harvest, already delayed because of wet weather during planting.
The propane shortage is keeping farmers in parts of the upper Midwest from finishing collection of their corn, because they have no way to quickly dry the kernels. About 59% of the U.S. harvest has been completed, behind the historical average of 62% for this point in the year, the U.S. Department of Agriculture said Monday.
"Until somebody comes up with a solution to this propane problem-or we get some bright, sunny weather-we just can't do anything," said Richard Syverson, a 57-year-old farmer near Benson, Minn.
He stopped harvesting because he can't get hold of the 1,500 gallons of propane he uses daily-the equivalent of more than 300 of the tanks used in backyard grills-to run his corn dryer. "I have bills to pay, so I'd like to get this crop in so I know where I am financially," Mr. Syverson said. "It's cloudy and it's gloomy and people are in a bad mood."
Farmers are harvesting what is expected to be a record U.S. crop. The need for propane is most acute from North Dakota to Wisconsin, because the upper Midwest has received as much as six times the normal amount of precipitation in the past month, forcing farmers to dry more kernels, and ones that are wetter than normal.
The unusually wet weather is having far-reaching repercussions, forcing farmers to slow down harvests while they truck in propane from hundreds of miles away. Governors across the Midwest have signed executive orders bending trucking regulations to speed up deliveries. Propane prices are ticking higher as demand surges.
Ultimately, analysts say, there is likely enough national corn supply to keep overall prices stable. But if farmers have to leave plants in the field or store wet grain because they can't get enough propane for drying, the quality may decline, mold may form or the kernels could rot, reducing the value of the grain.
"It's expensive, and it's going to be a pain for the farmers," said Tomm Pfitzenmaier, a partner at Summit Commodity Brokerage in Des Moines, Iowa. "It's going to slow things down from getting into the bin, but it's not going to stop the corn from being harvested."
Corn futures for December delivery on the Chicago Board of Trade fell one cent, or 0.2%, to $4.27¼ a bushel Friday, the lowest close for the front-month contract since Aug. 31, 2010. The price has plunged 39% in 2013 on forecasts for a record crop, just a year after prices hit an all-time high as farmers grappled with the worst U.S. drought in decades.
Wholesale prices for propane, meanwhile, had climbed to $1.171 a gallon as of Monday, up from $1.008 a year earlier and close to an 18-month high, according to the Energy Information Administration. The fuel, which is made from processing crude oil and natural gas, is used for everything from cooking food to drying clothes. Less than 10% of U.S. homes rely on propane for heating, according to the EIA.
Peter Fasullo, principal at En*Vantage Inc., an energy-consulting firm in Houston, said propane prices also are going up because refiners are exporting more of it. Exports soared to 9.1 million barrels in August, from 4.8 million barrels a year earlier, according to the most-recent EIA data. Mr. Fasullo said propane prices aren't likely to rise further but will "remain pretty firm" because of the corn-related demand.
The corn farmers' demand has helped drive Midwest propane supplies in October to their lowest in nine years, according to the EIA. Stockpiles in the U.S. Midwest on Oct. 18 totaled 23.6 million barrels, down from 27.4 million barrels a year earlier.
"There is adequate supply of propane in the U.S. The problem is getting it where it's needed fast enough," said Roger Leider, executive director of the Minnesota Propane Association, a trade group of more than 180 companies.
Propane suppliers are rushing to ship the fuel to the region. The governors of Minnesota, Wisconsin, Iowa, North Dakota and South Dakota all have signed executive orders exempting truck drivers from limits on how many hours they can drive at a time so they can transport propane more quickly.
Kinder Morgan Inc., which operates about 80,000 miles of pipelines and 180 terminals that handle natural gases, petroleum and crude oil, said shipments of propane through its Cochin pipeline to four western terminals in North Dakota, Minnesota and Iowa have more than tripled to 770,058 barrels this month.
A rare confluence of events has fueled the rush for propane. Farmers from Nebraska to Ohio who would normally stagger their harvest times all started collection at once because cold, wet weather across the Midwest in the spring delayed planting. Weather during the summer was favorable, so the USDA is projecting the U.S. corn crop will total 13.8 billion bushels, easily topping the previous record of 13.1 billion in 2009. Excessive rainfall in the past 30 days in the upper Midwest has left grain soggy.
Corn must be dried until water accounts for no more that 15% of the kernel weight before it can be safely stored without risk of rotting or developing disease, said Adam Czech, a spokesman for the Minnesota Corn Growers Association in Shakopee. Kernels in the upper Midwest have been averaging about 21% moisture, he said.
Farmers rely on propane deliveries to fuel their dryers, because natural-gas lines generally don't run to farms. The dryers, some of which are towers that can soar 10 stories high, all work in a similar way: Hot air, fueled by propane, is pushed through the machine, while corn is fed from the top along perforated metal slabs. The grain trickles down through the machine, drying as it goes. It exits into a cooling bin, where it can sit or be moved again into storage.
Mr. Syverson, the Minnesota farmer, normally grows 100,000 to 120,000 bushels of corn a year. His propane supplier has had to travel more than 500 miles to Kansas to procure supplies, which delays harvest and increases the price of the gas.
Growers who, in the past decade, have increased the amount of storage they have on their farms also added dryers to avoid having to pay elevators to dry their grain, said Bob Zelenka, executive director of the Minnesota Grain & Feed Association in Eagan.
While a lack of propane is an annual worry, this is the worst shortage he has seen in more than 20 years, Mr. Zelenka said.
About 29% of the corn crop in Minnesota-the fourth-largest grower, after Iowa, Illinois and Nebraska-was harvested in the week through Sunday, making the problem more pronounced, he said. The tanks at the state's 10 propane terminals are mostly empty, meaning trucks are loaded directly from the pipeline, which takes more time.
John Plathe, 49, a corn farmer in west-central Minnesota near the town of Wilmer, said he has nearly wrapped up his harvest but has wet corn stored temporarily in a bin until he can get enough propane for drying. He said he doesn't blame the gas suppliers, because, in normal years, demand for propane isn't as strong. Still, the wet, cool weather is making life difficult.
"A lot of guys are being rationed at 300 to 500 gallons a day, and it's just not enough," Mr. Plathe said. "If this were a normal fall, the corn would've dried down in the field. But the weather changes, and it's a guessing game for the pipelines. Right now, everything is working against us."
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