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Today in Energy

October 2, 2014

Propane use for crop drying depends on weather and corn markets as well as crop size

graph of prime supplier propane sales in top corn producing states, as explained in the article text
Source: U.S. Energy Information Administration, Petroleum Marketing Monthly
Note: These data measure primary petroleum product deliveries in the states where they are locally marketed and consumed.

Republished at 8:30 a.m. to correct an error in the text.

The U.S. Department of Agriculture expects this fall's corn harvest to be slightly larger than last fall's record harvest. Depending on the timing and moisture content of the crop, the harvest could have effects on the propane market, as propane is among the fuels used for crop-drying. Propane consumption in corn-producing states typically rises in September and October with the corn harvest, followed by a larger rise related to space-heating needs in January.

The weather influences both the moisture content of the crop and when it reaches maturity. If weather is favorable, farmers may let their corn dry in the field, especially if there is not a price incentive to get it to market right away. Last year, propane demand in the top five corn-producing states increased in October to levels that rivaled the normal peak demand in January, drawing down propane inventories before the heating season began. Propane inventories in the Midwest were drawn down by 4.1 million barrels (130,000 bbl/d) in October, which was the largest October stock draw since 1985.

As a result, Midwest inventories of propane started the heating season at relatively low levels and remained at the bottom of the five-year range through December. Logistical problems, including the closure for maintenance of the Cochin Pipeline that transported propane from Canada to the Upper Midwest and disruptions of rail transportation, prevented Midwest inventories from being replenished before winter began. With prolonged cold weather in January and February, propane inventories dipped well below the five-year range.

Midwest propane inventories are higher going into this harvest season. As of September 26, inventories were above the five-year average and 3.7 million barrels higher than year-ago levels. However, recent infrastructure changes may affect propane supplied to the Midwest in the coming months, especially under high-demand conditions. The Cochin Pipeline was reversed earlier this year and now moves condensate from the Midwest to Canada. However, at least some of these supplies will be replaced by additional supplies from several existing pipelines that move propane north from Conway, Kansas, to the upper Midwest, as well as by expanded rail and storage capacity in the region.

graph of midwest (padd 2 ) propane inventories, as explained in the article text
Source: U.S. Energy Information Administration

Principal contributor: Stacy MacIntyre