Farm Horizons, April 2014

Local turkey farmer says propane shortage in Midwest could have devastated food supply

By Jennifer Kotila

The recent propane shortage in the Midwest had turkey farmers scrambling to find propane to heat their barns and keep young turkeys from freezing, including Howard Lake turkey producer Phil Munson. If the shortage had continued, “It could have been absolutely devastating to the food supply,” Munson said.

If turkey farmers would have been completely unable to find fuel, flocks of turkeys would have been lost. “We were thinking about shutting down for a while because of propane,” Munson noted.

In one of Munson’s barns, propane did run out and the barn was without heat for six hours before more could be found. Fortunately, it was a barn of adult turkeys, which maintain heat easier, Munson noted. If it had been a barn full of pullets (young turkeys), the entire barn of turkeys could have been completely lost. However, if propane could not have been found to heat the barn, conditions would have deteriorated quickly due to condensation, creating unsatisfactory conditions for the turkeys health, Munson noted.

“Some of our turkey farmers are delaying shipments of young birds to their farms to save on propane, but that can only be put off for a week or two before it wreaks havoc on the schedules of both the farmers and processing companies,” said Steve Olson, Minnesota Turkey Growers Association (MTGA) executive director. At the time he made this statement, farmers were working with suppliers and other farmers to share propane, and MTGA was working with Minnesota’s Congressional delegation to ensure that propane supplies did not run out.

The propane shortage and hike in prices could not have come at a worse time for local turkey farmers, who were on the verge of rounding a corner and again becoming profitable after a couple of years of losses. Now, profits will not be seen until mid to late summer, noted Munson.

‘Plenty of propane available, just not in the Midwest’

The propane shortage hit the Midwest during one of the coldest winters in recent history. However, the crisis was not caused by a low propane supply. Instead, it was caused by transportation and pipeline issues, Munson noted. “There was plenty of propane available, just not in the Midwest,” he said.

A number of events, the extremely cold weather being one of them, all came together to cause the rise in propane costs and the short supply in the Midwest this year. “Hopefully we won’t get this perfect storm again,” Munson said.

One has to go back to October for the full picture. Large regions of the Midwest harvested crops simultaneously, something that usually occurs in stages. The abundant, wet crop had to be dried for storage, which drew down stored propane supplies in the area, according to a Jan. 22 press release from the National Propane Gas Association.

Infrastructure realignments that occurred at the same time also reduced the amount of propane available in the Midwest. The Cochin pipeline, supplying 40 percent of the propane used in Minnesota, was shut down for repairs. That, along with propane imported from Canada being impaired by rail re-routing, forced Minnesota and Wisconsin retailers to get propane at the pipelines in Iowa, increasing demand in that state, according to the press release.

The demand for residential, commercial, and agricultural heat soared with the extremely cold weather experienced throughout the US, adding 10 percent more days in which heat was needed over last year.

Also, the US was exporting more than 20 percent of its total US supply of propane in 2013, which is up 5 percent from 2008, according to the press release. According to the Energy Information Administration (EIA), US propane stocks had fallen far below the 5-year seasonal average. EIA reported that propane stocks were 25.8 million barrels lower than the winter of 2012-13, which is a drop of 44.9 percent.

“All these combined to prevent regional inventories from recovering and the existing pipelines and terminal infrastructure has been unable to recover,” the press release stated. “This required longer driving distances and loading times, a scarcity of available product, and delays in making deliveries to customers.”

During the shortage in the Midwest, semi-trucks were running propane to Minnesota from Texas 24-hours-a-day, and some was brought in by railroad. This was enough to get turkey farmers through the winter, Munson said.

For the first time ever during the shortage, the Federal Energy Regulatory Commission (FERC) invoked its emergency authority under the Interstate Commerce Act to alleviate the situation, directing Enterprise TE Products Pipeline Company to temporarily prioritize delivery of propane from Mont Belvieu, TX to the Midwest and Northeast, according to a Feb. 7 press release from FERC.

“We’re mindful of the emergency situation that has developed in parts of the country where bitter cold weather has created problems for consumers who need supplies of propane,” stated acting FERC Chairman Cheryl LaFleur in the press release. “The problem is acute enough that we feel it is important for us to take this step.”

Less than a week later, FERC extended the propane shipping priority until Feb. 21 after reaching an agreement with Enterprise TE Products Pipeline Company and the National Propane Gas Association Feb. 10, according to a Feb. 11 press release from FERC.

The biggest concern now is what will happen in the future. At this time, the only thing the government is proposing to prevent another propane shortage is ending the tax on propane tanks, Munson said. That will not help turkey farmers, many of whom would not be able to store enough propane to get them through the winter, Munson said.

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