Spike in propane prices worries Midwest farmers

Some propane dealers have been forced to ration customers

Published: February 12 2014 | 2:48 pm - Updated: 29 March 2014 | 3:33 am in
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Residents across the Midwest are struggling with tight propane supplies, especially in this bitterly cold, snowy winter. But it’s not just homes in rural counties that are lacking adequate heating fuel. Farms that put bacon and eggs on your breakfast plate are also feeling the supply pinch.

Hog farmer Phil Borgic of Nokomis, Ill., burns liquid propane – LP - from September through May to support his piglets. His farrowing barn goes through about two semi truckloads of LP each year.

“We’ll go into the winter then with our tanks full, but because this winter has been so cold, I’m done with my contracted LP,” said Borgic.

Farmers often try to buy their propane supply in the summer when demand and prices are lowest. Borgic locked in a $1.79 per gallon price last summer, but now he is facing prices closer to $5.00 because of supply hiccups around the nation. Some propane dealers have been forced to ration customers, only filling tanks partially to ensure others don’t run out completely.

Before May, Borgic said he will have to dip into reserve funds to keep his little hogs warm. “Because you’ve got to have [LP],” he said. “It’s not something that’s an option.”

Most hog farmers can’t pass increased heating costs along to their customers. Borgic sells a set number of pigs at a previously negotiated price each month to Smithfield Foods, Inc., owner of Farmland brand bacon.The forward contract doesn’t allow him to tack on extra expenses like fuel costs.

“The marketplace sets it or we’re under contract to deliver for a certain price,” Borgic said. “So it comes off my bottom line. My gross doesn’t change. Just my expenses are going up.”

Farmers like Borgic say the propane price spike will force them to put off repairs and other farm projects this year.

It’s not just pork producers like Borgic who rely heavily on propane, poultry farmers are struggling too.

“We haven’t heard of any losses yet, but one thing that does happen is that if the birds get gold, they get stressed,” said Steve Olson of the Chicken and Egg Association of Minnesota. “The stress can lower the immune system and bring on potential for disease.”

According to Olson, Minnesota turkey farmers have been forced to slow production because propane has been prioritized for heating homes over barns. He says Thanksgiving is a long way off, but the price of turkeys could be impacted if the supply of birds falls short of expectations.

The “polar vortex” that has swept repeatedly through the nation is partly to blame for the propane shortage. But so is the cold and wet corn harvest last fall.

When Mother Nature does not dry corn in the field, grain elevator operators use propane-fueled heaters to get it to a lower moisture level so it can safely be stored. And wetter-than-normal corn from the 2013 harvest is still coming in to elevators, as many farmers wait to deliver grain until the following calendar year for tax purposes.

“The crop just simply did not dry,” said Russel Higgins with the University of Illinois Extension. “Part of that is because it was late planted. We just didn’t have the weather to dry that grain any further.”

The above-average use of propane to dry grain sapped local supplies last fall and continues to put pressure on the industry. With states from Oklahoma to Maine extending emergency declarations for heating fuel, the propane pinch does not appear to be easing any time soon.

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