The hot and dry conditions in the U.S. have led to a decrease in the moisture content of corn and soybean crops, resulting in average to below-average propane demand for crop drying this year.
Regional Variations
While Eastern U.S. states can anticipate normal propane demand for crop drying, Ohio is expected to have the highest usage level. On the other hand, states like Illinois, Iowa, Nebraska, and Minnesota will experience below-average demand due to the scorching weather conditions. North Dakota and South Dakota, however, should see average demand.
Harvesting Schedule
This year, the favorable spring weather led to an early planting season, causing the harvest to also happen earlier than usual. As a result, the need for crop drying is further reduced since farmers won’t have to wait longer to harvest their crops.
Drought Conditions
The summer heatwave has worsened drought conditions in the upper Midwest. Minnesota reported that 63% of pastures were in poor condition by September 3rd, while Kansas, Iowa, and Missouri saw nearly half of their rangeland and pastures in very poor to poor condition.
Corn Crop Conditions
As of September 3rd, 18% of U.S. corn crops were fully mature, with 53% of corn acreage rated in good to excellent condition. However, hot and dry conditions have also affected immature crops. In Missouri, Kansas, Minnesota, and Nebraska, at least one-quarter of the corn was rated poor to very poor compared to the national average of 18%.
Weather Outlook
While the current weather conditions will not impact the maturity of the corn crop, significant rainfall could hinder farmers’ ability to harvest sooner. Despite these challenges, the ample propane supply puts the U.S. in a favorable position for the upcoming home heating season and livestock activities.
U.S. Propane Stocks and Crop Drying Demand
By Karen Boman and Rajesh Joshi
Propane stocks in the United States have reached an impressive milestone, exceeding 100 million barrels. Additionally, propane levels on the Gulf Coast and in the Midcontinent are currently well above normal. Despite this, experts believe that crop drying, which typically relies on propane, will have little impact on prices in Mont Belvieu or Conway.
The amount of propane used for crop drying varies greatly from year to year, depending on several factors such as the size and timing of the harvest, the location, the moisture content of the corn, and the weather conditions. In the Corn Belt, where crop drying can last from mid-September to mid-November, farmers may opt to naturally dry the corn in the field when the weather is dry. It is estimated that during the six-to-eight-week period, propane demand for crop drying could increase by approximately 200,000 b/d. However, this is only a rough estimate.
According to Peter Fasullo, a principal with EnVantage Consulting, propane crop drying demand is not expected to significantly impact prices. Fasullo believes that if there is any impact, it will be temporary due to the abundance of propane available.
Traditionally, when crop-drying demand affects the propane market, Conway propane trades at a premium to Mont Belvieu propane. However, Conway has maintained a discount compared to Mont Belvieu propane, and this discount has widened recently. On Tuesday, Conway propane was traded at a 3-4.25cts/gal discount to TET propane, with a month-to-date discount of 1.3676cts/gal.
While Mont Belvieu propane prices saw a rise of over 4% in early Wednesday trading due to stronger oil futures prices, TET propane anys traded at 73.75-74cts/gal. Conway propane also experienced growth, increasing by 3.92% to 69-70.25cts/gal.
Editing by Michael Kelly.