Farmer Dries Corn and I Do Care

The northern corn-belt states are winding down from a very wet bumper crop of corn which has required a lot of grain drying, fired by propane.  That has translated into a shortage of propane supplies – so much so that seven governors recently issued emergency orders to expedite propane deliveries to their states.  Now, with about three weeks left before the official onset of winter (and it feels like winter already), 2013 Midwestern propane problems should be behind us.  But what about next year?  In 2014, Cochin pipeline – one of the most significant traditional sources of propane for the region goes away.  Kinder Morgan (current owner and operator of Cochin) is reversing the system and turning it into a diluent pipeline.  Volumes of propane previously delivered by Cochin must come from somewhere else.  Today we’ll continue our series looking at upper Midwest propane and how the region is likely to adjust in the post-Cochin market.

Corn drying in the Midwest is finally wrapping up, but farmers and grain elevators are still short of propane supplies even after emergency orders were imposed by several Midwestern governors. The shortage has contributed to a spike in propane prices and the Conway, KS market jumped above Mont Belvieu last week for the first time since February 2011.  But, there is more to the story.   The upper Midwest is enjoying the largest bumper crop of corn in the record books, and due to recent weather it is “wet” corn needing more drying, thus more propane.  With the U.S. “bumper crop” of propane from processing shale gas flooding the market, you might wonder why there is a problem.  Clearly the answer is logistics – having the barrels at the right place at the right time.  And that’s the reason for more concern when we get to next year.  Because one of the primary propane supply conduits to the Midwest – Cochin pipeline - goes away in early 2014.  Today we start a series to look at what’s going on with Midwest propane and how that market is likely to change when Cochin is reversed and turned into a diluent pipeline.