A perfect storm of distribution challenges have caused serious concern among on-farm propane users across the country, including in Nebraska. With pronounced distribution issues and skyrocketing prices plaguing propane users in the upper Midwest, farmers and their suppliers have been left scrambling to locate propane when they need it.
"Weather has been such a big factor involved in this situation," says Dave Carlson, owner of Carlson Home and Auto, Inc. in Wausa. Carlson is a second-generation owner of their propane supply company that was founded in 1946 by his father, covering primarily a three-county area of farms and households in northeast Nebraska. "In a year like this one, with extreme cold for long periods, there have been so many variables we cannot control," he says.
About 865,000 farms in the U.S. use propane. According to Mark Leitman, director of business development and research with the Propane Education and Research Council, propane prices and supplies have been very competitive over the past two years. As a byproduct of oil and the booming natural gas industry, production of propane has been at historic highs, and excess propane was being exported from the country at record levels. According to PERC, about twice as much propane was exported in 2013, compared to the previous year. Over the past decade, exports have risen from essentially zero to more than 20% of U.S. propane production last year.
The December shutdown of the Cochin pipeline in the upper Midwest coupled with competition for pipeline access from increased supplies of oil and natural gas caused a shortage of propane in the region exactly when it was needed. In a Jan. 30 statement from PERC, the council also cited the fact that most of the large national storage facilities are located outside of the Northeast and Midwest, where the most propane is used.
All of these challenges came to a peak when Arctic fronts moved across the upper Midwest and dipped into the South, causing pressure on supplies, increased demand and skyrocketing prices, Leitman explains. In the long term, he believes that propane will continue to offer an efficient, cost-effective fuel for farm use, and that prices will return to a more normal range. As for preventing supply shortages in the future, Leitman says, "We tell farmers that communication up and down the supply chain is important." He notes the benefits of contracting supply ahead of time to share the risk with the supplier and make sure that product is on hand when it is needed. "Propane marketers and their suppliers will be growing their ability to hold product, building more infrastructure," he says.
You can learn more about the impacts of recent propane shortages and about farm propane incentive programs by reading an upcoming print article in Nebraska Farmer magazine or by contacting Leitman at 865-694-8971 or visit PERC online at www.agpropane.com.