Each week we draw closer and closer to more consensus on the type of grain drying season we’ll see in the propane industry. As of right now, the wind is blowing in the direction of ‘this one could rival or exceed last year’, at least throughout most of the Midwest.
I have the good fortunate of marketing on every major pipeline in the United States, as well as out of shale production regions and NGL proprietary terminals throughout the country. I am the only person in our company to do that and not too many marketing reps get a chance to do that for their companies. It’s not that I am special; it’s just the territories that I have. In the end, I love it this way because all of the markets play off of one another.
Having a wide region to cover also gives me the opportunity to hear a lot of talk across much of the fruited plain, intel that helps me shape and form my opinions. This comes in especially useful for grain drying.
I know several large marketers who are order 20 to 30 percent more propane for this drying season than last year’s drying season and that flurry of activity has picked up as of late as farmers are calling in to take longer positions, based on their belief that this crop will be big and require drying.
Here are some bits, some directly relevant and some partly anecdotal, which supports those beliefs:
COOL RUNNINGS: You don’t need to be a meteorologist to know this summer has been mild…but it’s been more than mild. It’s been record setting mild. To whit:
Indianapolis is 480 miles east of Kansas City yet they have experienced record setting conditions this summer, too. As of August 5th there have not been any 90 degree or greater days in that city and they just experienced their coldest July mean temperature average in recorded history, by a whopping .5 degree margin. July 2014 was over five degrees colder than the average mean temps. Up the road a few hours in South Bend, they just experienced their 3rd coldest July on record. Back to Indianapolis’ lack of 90 degree temps this summer…there have been three previous instances where the first 90 or greater degree day took place in August or later has happened three other times; 1960, 1979 and 2004.
So we have this lack of sweltering temps across the nation’s bread basket, which leads to favorable corn growing conditions, especially with timely rains…and another round of those appear to to be in the offing for the coming week:
So the corn is not distressing…it’s still fairly green in most places and even areas where farmers and marketers previously believed there would be little drying (Southern Illinois), now those folks are not so sure because of the slow march of corn maturation given these ideal growing conditions.
HUGE CROP: This week’s corn crop report showed a 2% decrease in the ‘Good to Excellent’ rating, but this is still the best rated crop in 20 years.
Thoughts on the El Nino continue to be pessimistic…that the El Nino may not form this year or if it does it will be a weak one…and with the ‘Ridge and Trough’ weather patterns still in place that we saw last fall and winter, one wonders what will knock it off its perch?
RAIL CARS: There is a shortage of rail cars nationally for January…we are hearing that some companies have oversold their inventory and are in the market trying to buy more January cars. To them I say good luck, because everyone is in looking for January cars.
FARMINGTON STILL DOWN: This is a possible HUGE wildcard for grain drying season that could affect people in Iowa, Illinois, Indiana and Wisconsin. The Farmington, IL terminal has been down since June 25th. Enterprise sent this out on July 23rd: ”
Elevated water levels along the Mississippi River have receded and allowed MAPL to resume routine inspections and assessment on the pipeline from Ft. Madison to Farmington. At this time, our goal is to have the Farmington lateral resume normal operations by September 1st pending timely regulatory permit authorization.
I remain skeptical that the September 1st date will be hit. I hope for the sake of the Midwest that it is back on line.
The Propane Buzz’s Barking Orders:
-Don’t be afraid to be long 4Q14
-Don’t be short Jan 2015
-Winter forecast trending colder with lack of El Nino
-Large grain drying year seems more and more likely