November 30, 2020

Got Propane?

20111005_farming_314 (1024x681)Big Changes Can Impact the Supplies You Need, When You Need Them

We won’t soon forget last winter, when propane prices soared to more than $5 per gallon.
A number of recent events have severely tested the capacity of the propane delivery system, and we want to give you a better understanding of how our area might be affected.

“In the propane industry, April 1 through September 30 is a key time to determine summer fill/allocations,” said Chad Besch, MaxYield Cooperative’s energy team leader. “We’ve noticed that the summer liftings through the pipeline are higher than normal.”

This is linked to big changes with the 1,900-mile Cochin pipeline, which used to carry propane from Canada, through North Dakota and Minnesota, across northeast Iowa, and into eastern Illinois. Its owners, Kinder Morgan Energy Partners, shut the pipeline down to install new pumps to reverse the pipeline’s flow and move a petroleum product called light condensate from the Midwest to areas in the north, where it’s used in the oil drilling industry.

Since the Cochin pipeline quit transporting propane, each terminal that supplies propane to companies like MaxYield must serve a much wider trade territory. In addition, it’s the pipeline company that sets allocation requirements if propane supplies get tight. Those allocations are then passed on by suppliers like Cenex. Allocation is a form of rationing to prevent long lines at
the terminals, Besch noted. Suppliers typically ration only to customers who purchase propane regularly, he added.

“When you go on allocation, the pipeline company looks at how much product you pulled from April through September to determine how much you get during allocation. If we go on allocation, we could get fewer propane gallons than ever before.”

Redistributing slices of the allocation pie

This situation is not unique to MaxYield, said Besch, who noted that other companies in the area are also facing the same challenge.

Consider the terminal in Sanborn, which supplies MaxYield with propane. “Let’s say this terminal typically sells 100 loads of propane during the summer-fill time,” Besch said. “If we get 10 of these loads, we get 10% during allocation.”

Now consider the shutdown of the Cochin pipeline. “Let’s say Sanborn sells 400 loads instead of 100 this year, since each terminal must serve a much wider territory. If we still take our 10 loads, we’ve dropped from 10% during allocation to only 2.5% on allocation.” As terminals serve a wider area, crop conditions across a wider geographic region could affect our propane supplies here. “When you get north of Interstate 90, they are likely going to dry a lot more corn,” Besch said. “This makes propane supplies for the fall grain drying season that much more of a wild card.”

Finding energy solutions

To address this challenge of allocation, MaxYield started going to Ogden to purchase propane and build some allocation at this terminal, too. MaxYield has also promoted its propane tank storage program this year.

“Our lease-to-own program for 1,000-gallon tanks is one of the most affordable options to keep your grain dryers running this fall,” said Besch, who urges clients to have 48 to 72 hours’ worth of capacity for propane storage.

MaxYield also continues to look at additional propane storage options. “In addition, we’ll add an extra LP transport this fall for internal use to go to the terminals and provide you with timely propane service,” said Besch, who urges you to visit with your MaxYield energy solutions specialist for your propane needs.

Fill Up with Diesel

The challenges emerging in the propane market today are similar to issues that started transforming the diesel fuel sector 10 years ago.

“Make sure your diesel fuel tanks are full before going into fall,” said Chad Besch, MaxYield Cooperative’s energy team leader. “We don’t foresee any local supply issues, but if there’s a disruption in the Middle East, the situation could change quickly. Also, basis typically goes up in the fall, so fill up and be ready to go.”


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