By Doug Schmitz
WASHINGTON, D.C. – Currently, supply is steady and within the industry’s five-year average according to Mike Newland, director of agriculture business development for the Propane Education & Research Council. “Price is fairly steady and is trading at a significant discount to gasoline and diesel,” he said. “In fact, propane is at a bigger discount than we typically see to the other energies. Supply chain specifically has not caused issues for our industry.”
In Indiana, Matt Solak, executive director of the Indiana Propane Gas Association in Indianapolis, said, “We continue to closely watch pricing and inventory trends as we head into the end of fall and the beginning of winter.
“Winter brings increased demand for propane, which normally causes a draw on inventories and a run-up in price throughout the heating season,” he said. “While current U.S. production more than meets U.S. demand, there are, however, limits on the safe transportation of propane from supply points, as well as limits on pipeline capacity.”
Nationally, he said, inventories are above industry expectations, but Midwest inventories are slightly below the five-year average.
“Coupled with a forecast for a wetter and colder-than-normal winter could bring some periods of tight supply,” he said. “Regarding prices, (with the U.S. Energy Information Administration)’s base case projections, propane costs will increase 5 percent from last winter. This is a smaller increase than price forecasts for natural gas, electricity or heating oil.”
He said supply chain issues have certainly affected all industries and the propane industry is not immune to these challenges. “Workforce shortages and limited production of propane tanks top the supply chain issues in our industry,” he said. “Like all challenges, preparation is the key to managing through these issues.
“Despite workforce challenges, we are confident we have the people and product in place to ensure deliveries for our customers,” he added. “We also continue to closely monitor negotiations between unions and rail carriers to ensure there are no disruptions in rail service.”
He said, “There is enough propane to satisfy all domestic customers, including Indiana farmers, but it is critical that propane suppliers and farmers communicate regarding needs and adjust their supply plans accordingly.
“While a typical relationship between a farmer and propane marketer occurs at a very local level,” he said, “it is important for farmers to remember that propane is a commodity, subject to the changes in the market or unforeseen weather events.”
He said, often, extreme weather events in other parts of the country or even globally can lead to shifts in demand and result in distributions in parts of the country not impacted.
“Indiana farmers should have conversations with propane suppliers to ensure they have a supply plan that fits their farm needs,” he said. “An increase in on-farm storage always adds to the security of the propane supply, but so can a diverse and reliable supply plan from their supplier. Finding a propane supplier that a farmer can view as a partner to their farm is key to success in non-normal times,” he added.
In Illinois, Brad Blair, executive director and trainer at the Illinois Propane Gas Association in Springfield, said, “There is enough propane supply to satisfy our domestic customers. (But) there is always the possibility of severe or unexpected natural disasters that can affect the supply.
“So far, I have not had any problems called into our office this year,” he said. “However, it is still early. As in past years, this is always a concern. But as in past years, the suppliers have always been able to adapt their strategies to overcome any supply issues.”
Derek Dalling, executive director of the Michigan Propane Gas Association in Lansing, who also oversees Ohio’s propane supplies, said, “We are thrilled to report that propane price increases on average were significantly lower than price increases in the other energy markets.
“According to the U.S. Energy Information Administration, natural gas is up 28 percent, heating oil is up 27 percent, electricity is up 10 percent, and propane is up 5 percent on average over last year,” he said.
“For supplies, we are equally thrilled to report inventories have increased more than was anticipated, meaning we are right in the middle of the five-year industry average for supply. That is a great sign heading into winter,” he added.
He said propane retailers throughout Michigan and Ohio encourage propane customers to prepare for winter ahead of time by taking advantage of customer savings programs.
“So, overall, propane retailers are very optimistic about a solid winter heating season without any anticipated problems,” he said. “Of course, here in the Midwest, the weather is always the X factor.”
Butch Carper, general manager of Rutland Bottle Gas, Inc., in Rutland, Ohio, said prices for propane around the country have fallen from where they were at the beginning of summer.
However, he said most propane marketers will and have purchased their projected propane usage for the 2022/2023 season by early- to mid-summer.
“With that said, prices are higher than they were last year,” he said. “Farmers can expect the propane prices to be 20 to 40 cents higher this season. Thankfully, we haven’t had any major delivery concerns. (But) we can always expect delivery issues when terminals go down and when trucking companies have their normal breakdowns.”
He said storage is one of the main concerns for Ohio farmers.
“Another thing that farmers can do is contract ahead of time to ensure their supplier will have adequate supply,” he said. “One thing farmers don’t want to do is wait until they need propane, and then call for availability and price. Working with your supplier early in the summer will guarantee adequate supply and consistent pricing.”
Jean Bowen, energy business lead at River Valley Cooperative in Mount Joy, Iowa, said, “Typically, propane providers will hedge positions and purchase physical contracts to ensure they can adequately supply their customers. Most providers will place priority with customers who have planned ahead and contracted gallons.”
Steve McClain, Kentucky Retail Federation director of communications and public affairs, said, as far as supply, Kentucky is projected to be in the middle of the five-year average.
Right now, he said there aren’t any delivery problems necessarily, but there have been issues throughout the year to get tanks and supplies to maintain them.
“There is also a shortage of delivery drivers that has stretched available delivery staff,” he said. “New requirements to get licensed to drive trucks have also made it more difficult to get new drivers certified.”
Ginger Raffield, executive director of the Tennessee Propane Gas Association in Athens, said the state’s propane stocks are very close to their 2021 inventory levels.
The Propane Education & Research Council has developed tools, like its Grain Drying Calculator, that can be used to estimate gallons ahead of each season and take back control over energy availability. To learn more about the grain drying calculator, visit: https://propane.com/propane-products/grain-dryers/