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Published July 21, 2014, 10:05 AM

Fall propane shortage prompts increased tank storage

After spot propane shortages for grain drying last fall, and the permanent loss of a major pipeline to oilfield products, propane suppliers encouraged farmers to install increasing propane storage and then fill those tanks in the summer.

By: Mikkel Pates, Agweek

FARGO, N.D. — After spot propane shortages for grain drying last fall, and the permanent loss of a major pipeline to oilfield products, propane suppliers encouraged farmers to install increasing propane storage and then fill those tanks in the summer.

The Cochin Pipeline near Carrington, N.D. — the main source of propane for drying and heating — switched direction and now takes products into the Canadian oilfields. Some farmers were caught by short supplies because of their own reluctance to purchase in advance, as well as railroad uncertainties.

“What I’ve heard is that there’s some expectation that the supply situation isn’t going to be much different than last year,” says Ken Hellevang, a North Dakota State University Extension Service agricultural engineer. “It’s going to depend on the quantity of the corn drying we’re facing. Unfortunately, it’s too soon to determine what that need is going to be. So far we’re having a cool summer, which indicates a likelihood that we could be facing high-moisture corn this summer.”

Filling Cochin void

Tony Ascheman, North Dakota territory sales manager for Westmor Industries of Morris, Minn., says his company has stepped up production of propane tanks, but there is a limit to how fast they can go. The company makes about three tanks per week in Morris and has similar subcontractor production in two other places. The Morris factory also makes products for rolling stock for moving propane to the country.

“If a guy would want to call today and wanted propane tanks, it would probably be late October or early November to get a tank,” Ascheman says.

The 30,000-gallon tanks run roughly $80,000 each, plus another $40,000 for installation — a total of roughly $120,000. Westmor is the major player in the market in the region and installs more than 80 percent of the tanks it makes. A few large operations have even put in 60,000-gallon tanks, which run about $160,000 installed.

Galesburg Co-op Elevator Co., for example, helped several of its patrons order 30,000-gallon bullets — one for the elevator and five more installed on farms.

“We helped them get them and are coordinating the crane,” says Tom Boeka, elevator manager.

Boeka says he ordered the tanks from Westmor last fall, after his customers came too close to stalling out their harvest because of lack of fuel for drying. They were only out of propane once, and for 12 hours. The elevator had to truck in propane from the Carolinas and Texas at unbudgeted premium costs.

Railroad uncertainty

In the past, the pipeline would be able to project down times about 80 percent of the time, so elevators and propane suppliers could truck in product from terminals elsewhere in the country, Boeka says.

“Now, you’re railing it in, and if the railroad misses a click, we won’t know and it’ll be two days before we can get those loads from Nebraska,” he says.

Pete Skarnagel, manager of Hunter Grain Co. in North Dakota’s Cass County, says his elevator has about 50 dryer propane customers and about half of them have increased their propane tank capacity.

“If a farmer had four 1,000-gallon tanks, now they want six,” he says. The scale of expansion depends on the size of a farmer’s dryer, he says. The cost of a 1,000-gallon tank is about $2,000, installed.

Often farmers want to have more than a day’s supply on hand. Not many farmers will want to have a week’s supply on hand, as some propane suppliers suggested last winter, Skarnagel says.

“They’re still depending on us to be out there every other day,” Skarnagel says, adding none of his customers have installed the big 30,000-gallon tanks so far. He notes the elevator this year installed a 7,000-bushel-per-hour dryer — the highest capacity on the market. That only takes 10,000 gallons of propane a day, he says.

“I think some people are getting oversold on how much propane they actually need,” he says.

Skarnagel says farmers are also filling propane tanks, which is normal. The elevator offers a one-time reduced price for the summer — $1.50 a gallon, which is up from last year’s $1.35 for this time of year. He expects all agricultural customers will have filled up by Oct. 1, when drying season could begin. He says the company hasn’t started advance contract propane sales and won’t until after Labor Day, which is normal.

“There’s interest, but we haven’t started it,” he says.

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