By T.L. Hamilton
DTN Refined Fuels Reporter

U.S. propane stockpiles are at about a 15-percent surplus, but farmers are finding propane in short supply in some areas of the country when they need it the most with their wet harvest. (Photo courtesy of GT Manufacturing)

HOUSTON (DTN) -- This year's large corn crop is coming in later and wetter than normal, which means demand for propane to dry the crop has skyrocketed, and product pipelines are struggling to keep up.

The problem isn't due to supply -- recent Energy Information Administration reports peg U.S. propane stockpiles at about a 15-percent surplus in comparison to last year -- but rather distribution.

Enterprise Products Partners LP's Mid-America Pipeline (MAPL), which extends from Conway, Kan., to terminals in the Midwest, is running at full capacity, which is about 53,000 barrels per day (bpd) of propane, for the west leg, said Rick Rainey, spokesman for Enterprise, a Houston, Texas-based natural gas and crude oil pipeline company.

The company's lines are shipping as much product as producers can give them, but the lines cannot flow fast enough to satisfy crop-drying needs, Rainey said.

Since Enterprise cannot meet 100 percent of demand at all of its terminals, federal regulations require the line to put those terminals on allocation, a process that allows only customers who have built up credit throughout the rest of the year to get their propane supply. Other customers who have not built up those credits are denied product, which leads to long lines at terminals that are not under allocation, said Erik Triggs, a risk consultant for Energy RMS, based in Mount Vernon, Iowa.

The west leg terminals currently on allocation are located in Whiting, Ogden and Sanborn, Iowa; Canton, S.D.; and Mankato, Minn. Terminals at Clay Center, Kan., and Greenwood, Neb., were removed from allocation on Monday, but will placed back on allocation Friday, the company said. A terminal in Pine Bend, Minn., is currently on destination allocation, alternating between propane and butane. All of the terminals on the east leg of the line will go on allocation at 9 a.m. CST Friday, the company said Thursday afternoon. Those locations include LeCompton, Kan.; Kearney, Carrolton and Moberly, Mo.; Cantril and Iowa City, Iowa; Ft. Madison and Farmington, Ill.; and Janesville, Wis.

"There have been long truck lines with oodles of trucks in both Illinois and Iowa," Triggs said. "People are saying this is the worst it has been since 1997."

A North Dakota fuel distributor, who gets his propane from a terminal in Carrington, said filling at the terminal has been slow. The terminal has only been using one of two bays, and there have been delays of 20 minutes between fillings, he said. His trucks have had to line up overnight to get filled.

Propane allocations to the Carrington plant, which is on a pipeline that runs from Calgary, Canada, down through Mankato, Minn., and into Illinois, have been down considerably as the pipeline struggles to supply terminals farther south in Minnesota and Illinois where demand is currently high due to harvest. On Thursday morning, Carrington was allocated 8,902 barrels of propane, while the next terminal south in Benson, Minn., received three times as much -- 25,358 barrels.

"THINGS WILL GET REALLY UGLY"

"They're so busy in Illinois right now, they are getting most of the propane, and we're getting a trickle," the North Dakota distributor said. "Farmers are just finishing up their soybeans around here now. Next week will be really bad. Things will get really ugly in a week or two, once they start corn harvest."

The distributor said propane shortages in his area were so severe in 2008 that the dealer trucked in propane from Billings, Mont., nearly 500 miles away to meet customers' needs at harvest. It appears a similar situation could occur again this year.

"This year is worse than ever," he said. "Normally, the southern half of the U.S. is done harvesting when we start. This year it's been so wet most of the country is harvesting at the same time."

Special government waivers have been signed to allow truck drivers more driving time per week, so that time spent napping while waiting to receive propane supply won't count against them, said one propane shipper to the upper Midwest.

Trucks are in such high demand that some shippers can't even find one to hire.

"Trucks are going all the way from Iowa to Kansas" to get propane for customers, Triggs said.

At this point, it's difficult to tell when demand will start to even out. The U.S. Department of Agriculture is predicting that this year's corn crop will be the second-largest on record at 13 billion bushels.

"Some of our customers are just getting to the hump for their harvests, some are getting past the main brunt of it, while others are just starting," the shipper said. "It will be at least another three weeks of intense demand. I've never seen a corn drying season like this; it's extremely wet and there's lots of corn."

Editor's note: DTN Executive Editor Marcia Zarley Taylor contributed to this story.

T.L. Hamilton can be reached at tl.hamilton@dtn.com

(AG/ES)

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