This fall's corn harvest will have an influence on the propane market, the U.S. Energy Information Administration (EIA) announced.
Last fall saw a record corn harvest and the U.S. Department of Agriculture expects this fall's harvest to be slightly larger.
Propane is among the fuels used for crop-drying, which means that demand for the fuel in the agriculture industry is affected by the timing and moisture content of the crop, as well as the overall size of the crop. Typically, propane consumption in corn-producing states rises in September and October with the corn harvest, followed by a larger rise related to space-heating needs in January.
If weather is favorable this year, farmers may decide to let their corn dry in the field, especially if there is no significant price incentive to get it to market right away.
In 2013, demand in the top five corn-producing states increased in October to levels that rivaled the normal peak demand in January. As a result, propane inventories declined before the heating season began. In the Midwest, propane inventories were drawn down by 4.1 million barrels (130,000 bbl/d) in October — the biggest October stock draw since 1985.
Logistical problems, including the Cochin Pipeline being closed for maintenance and disruptions of rail transportation, meant that Midwest inventories could not be fully replenished before winter began. With prolonged cold weather in January and February, propane inventories dipped well below the five-year range, the EIA noted.
This year, propane inventories in the Midwest are higher going into the harvest season. Supplies may be affected by the reversal of the Cochin Pipeline, but at least some of that capacity will be replaced by additional supplies from several existing pipelines and by expanded rail and storage capacity in the region.