Propane prices have plunged to low levels thanks to ample supplies. As a result, farmers are locking in more propane earlier this summer as they prepare for the fall crop drying season. (DTN/The Progressive Farmer photo by Dan Miller) |
Just as several factors came together to
push prices higher in the winter of 2013 and 2014, propane industry
experts say there are several issues that have been pushing prices lower
recently. They report farmers have locked in prices earlier and some
have locked in more gallons than normal by midsummer.
SO MUCH PROPANE
Brian Milne, DTN Refined Fuels editor, said
there is a huge supply of propane, and this supply keeps building. This
is especially bad news for sellers during the summer "off-season" for
propane use.
"We have so much propane supply we can't use it fast enough," Milne said.
According to data from the U.S. Energy
Information Administration (EIA), the U.S. ending stocks of propane and
propylene were at 85.724 million barrels for the week ended July 4.
That's up from 60.073 million barrels at the same time a year ago and is
the highest level since the EIA began tracking propane ending stocks in
1993.
Chris Hund, branch lead for Premier Coop
located in Dodge, Wisconsin, said farmers are currently busy locking in
some of their propane needs for fall crop drying. Most of his farmer
customers order at least some of their fall needs by the end of July,
but so far, he's seen more gallons locked in early in the month than any
time in his 6 1/2 years in the propane business.
"I think this has to do with two factors,"
Hund told DTN. "One would be the high prices we saw in recent years and
where prices are now, and the other factor would be us starting to write
early pricing contracts for propane in recent years."
In addition to earlier pre-orders, Hund
believes more gallons will be locked in. The prospect of low prices
moving higher is pushing farmers to pull the trigger on more gallons, he
said.
The trend should make for a less stressful
fall delivery season for propane retailers, Hund said. Deliveries should
be spread out more, allowing retailers more time to get the propane to
farmers' tanks.
LOCKING IN
One of Hund's customers is Kyle Bushman, a
grain farmer from Cochrane, Wisconsin. Bushman recently filled up his
on-farm propane storage on his western Wisconsin farm ahead of the fall
crop-drying season.
"We do this, of course, to help us manage
the volatility in the gas market," Bushman said. "The last couple of
years proves how crazy it can get at times."
Bushman locked in a portion of his needs.
He's also toying with buying a bulk 30,000-gallon tank to house a year's
worth of his propane needs. In addition to allowing him to stock up
with cheaper fuel, being able to accept bulk loads can save a buyer
another 15%-20%, he said.
No comments:
Post a Comment