Good morning, one and all…here’s what’s on my mind on this day.
FROZEN TUNDRA: The amazing cold from this winter will linger in the lives of Midwestern propane dealers for a long time…perhaps as much as another year. How so?
1) We are coming out of this winter with inventory levels near record lows
2) We are capable of exporting enormous volumes of propane which had never been the case before last year
3) As such, price volatility will definitely be in our future this coming fall and winter
4) The actual COLD is going to contribute to a late plant and likely late harvest
Grain drying demand last year created the first of what would be many headaches in the propane industry for the season of 2013-2014. Its effects were felt all across the Midwest and even into the Southeast as some Midwestern retailers were diving down into Demopolis, AL or Apex, NC to pick up some extra loads. We saw a late plant last spring due to the moisture we received over much of the Midwest.
It looks like a similar timeline could be shaping up due to the depth of the frost line. We are talking a few feet of frozen tundra to deal with, as we sit here in early March. It’s going to take a while for the ground to thaw..and once the ground thaws it’s going to take even longer for the ground to dry up enough for heavy equipment to be allowed access on many of the roads used to move equipment to and from the fields for pre-planting preparations and ultimately planting.
So we could be looking at the possibility of a significant delay to the plant which could cause a bit of a repeat of what we saw last year…or it could be worse. Why?
EL NINO: Yeah, yeah, yeah, I am bringing this up again and it won’t be the last time. I’ve been talking about this for two months as I hit up several meteorologist friends and I check in on various climate related blogs and such…and this has been the big chatter since December.
Now, the ‘official’ folks are weighing in, being predictably conservative.
“The National Oceanic and Atmospheric Administration said Thursday that there’s about a 50% chance of a weather phenomenon called El Nino developing this summer or fall.”
Many of the folks I follow believe the likelihood is much higher than that, more along the lines of 70% to 75%. For some, it’s not a matter of if but when.
If we see it hit this summer, we could see a huge impact on yields…as in a bumper crop. And if the El Nino does set in then, you’re also looking at a wet bumper crop. A wet bumper crop in the Midwest with the loss of Cochin product in the region? It could make late October and early November of 2013 look like a picnic.
ADVICE: ALLOCATION is the word of the day. I realize some of you will have access to supply that will be sold at distressed prices during the summer month. There is nothing wrong with buying some of that product but my strong, strong advice is as follows; if you don’t earn allocation for the winter on any load lifted April through September, even if it’s just a 1 to 1 ratio, then it’s NOT A GOOD DEAL. The price may be better at the time, so you could ‘save’ money…But don’t forget the pains and lessons of this winter. NO ALLOCATION = RESIST THE TEMPTATION.
Hey, I like that…it’s catchy! But I am being serious as I think you’re going to need every last drop come next fall and winter. So please, regardless of whom you lift from this summer, make sure you’re getting something in return off each and every load come the winter time. It’s NOT a good price unless you get the winter return…not in this brave new world of logistical challenges we find ourselves in.