Corn Drying

According to the U.S. Department of Agriculture, this year’s corn crop was 94 percent harvested by November 24, 2014. Unlike the 2013 harvest season,  related crop drying activity by farmers to extract moisture from harvested corn has not led to shortages of propane- the main fuel used to power dryers. A wetter than usual crop last year started a Midwest propane shortage that morphed into a crisis by January when Polar Vortex winter weather spiked demand again and pushed prices above $4/Gal. This year the Midwest propane market has to cope with the loss of a major transport artery – the Cochin pipeline that used to bring Canadian propane supplies to the Midwest but has now been reversed to carry U.S. diluent to Canada. Today we examine  new Midwest propane delivery infrastructure.

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.