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Iowa Ag: Major economic issues with drying not expected this fall
By DOUG SCHMITZ
Iowa Correspondent

ROLAND, Iowa — In the 13 years Lynn Sheets has been in Iowa selling propane, he’s always known “the potential exists, but it always exists” for late planting resulting in more corn needing to be dried at harvest season.

“The corn drying has decreased with the changing of corn varieties over the years,” said Sheets, energy department manager at Key Cooperative in Roland, adding that 2009 was a standout year during his time in Iowa.

“We have a small percentage of producers that dry every year; they are larger farmers and users,” he added. “Their yield increase more than pays for the headache of drying. Iowa State (University) calls them ‘mystery bushels,’ according to the producers in this area.”
While late planting could mean Iowa farmers may need to dry more corn this fall, experts aren’t anticipating major economic issues with drying and propane (LP) supply during the 2013 harvest. “This year, Mother Nature will play a large role in determining the need for grain drying in the fall,” said Nick Hyde, director of petroleum sales and marketing at Heartland Cooperative in West Des Moines.
“Due to a small carry-in from last year, processors may need to entice producers with premium quick-ship bids. If that’s the case, we’ll see some fields opened up and drying that we normally wouldn’t see.”

In addition, Hyde said Iowa’s soybean harvest could play a role in how fast corn dries this fall. “Due to the delayed planting, soybeans will probably also come out later,” he said. “This will allow the corn to dry in the field a little longer.”

But Linda Kuhl, grain merchandiser with Mid-Iowa Co-op in Beaman, said there is a huge disconnect with farmer selling at this point.
“I really can’t say that I blame them,” she said. “Farmers are falling back on their crop insurance guarantee and price, and then going to make a decision after harvest unless an unforeseen rally is experienced. I am sure the plan is to put as much corn on the farmer as they possibly can.”

Unless farmers want to take the risk of selling at today’s prices because they anticipate they will be higher than new-crop prices, Kuhl said there’s not much they can do but book LP prices, which she estimates at $1.30-$1.33 per gallon.

“At this point,” she added, “we are not worried about the LP supply; we are concerned with the storage on the farm for LP.”

Iowa Agriculture Secretary Bill Northey said “demand will likely be much higher, so there could be some spot shortages. But I don’t expect widespread shortages. Propane supplies have been adequate recently and hopefully that will continue.”

Northey recommends farmers look at their propane supplies and consider topping off any tanks in anticipation of high demand this fall.

Deb Grooms, executive director of the Iowa Propane Gas Assoc., said there probably won’t be much demand for drying this fall, because of the hot and dry summer. “Average retail cost of contract propane around Iowa for corn drying and ag heating is around $1.20 to $1.40 per gallon,” she said. “Some marketers will give a volume discount if larger drops can be made.

“Retail propane prices could be 40 percent to 50 percent lower than last year. As for supply, barring any pipeline issues, there should be ample supply.”

Overall, Sheets doesn’t foresee any major issues with LP supply, storage and transportation, although “the ones who always dry will have supply and the hit-or-miss dryers could have problems.
“Midwest storage is not at an all-time high, which was last year,” he said. “But we are running at about the middle of the five-year storage average. A lot of propane was trapped in this part of the world, flowing from the north to the south and flow restricted by pipeline capacity.”

Sheets said Mont Belvieu, Texas, has proven “they will pay more and use more (up to 25 cents per gallon more than Midwest. Exports and manufacturing (plastics) are up astronomically. Pipeline capacity has increased, so the bathtub has been drained a little.
“In any market, the users who are inconsistent in use and expect a discount will always be the last to be served,” he said. “This is simple supply and demand in action.”

In the meantime, Sheets said what farmers can do if they lack adequate storage, transportation and propane for drying their corn is to have a good relationship with their propane supplier. “Then, be prepared for additional freight charges even if you have a contract,” he said, “because of having to travel beyond normal terminals to get propane.”
8/16/2013