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Farmers Should Prepare for Propane Expenses
North Dakota Ag Connection - 06/17/2019

It is likely that propane or other crop-drying fuel markets will be strained across much of the U.S., says Bryon Parman, North Dakota State University Extension agricultural finance specialist.

In March, the U.S. Department of Agriculture (USDA) projected nearly 93 million acres of corn would be planted in the U.S., with a state record 4.05 million acres of corn planted in North Dakota. However, persistent cold, rain and flooding across the Midwest has led to many acres being planted late, or not planted at all. In some regions, this issue will impact soybean planting as well.

The June 10 USDA crop progress report showed only 83% of corn planted nationally, compared to the 99% typical by this date, and 93% in North Dakota compared to 98% on average. Some states are much further behind with Illinois at 73% planted, compared to 100% on average, and South Dakota 64% planted compared to 99% on average.

"This year it is estimated that more than half of the U.S. corn crop will have gone in the ground after May 25," says Parman.

Along with the typical yield drag that comes with planting after the optimal window, late-planted crops also run the risk of not drying down adequately by the time the crop is harvested. This is exacerbated when the late summer and early fall are particularly cold and wet.

In some regions of the corn belt, crops can be left in the field longer as there are often warmer periods in the months of November and December allowing for corn and soybeans to continue drying, pushing the date that those crops are harvested out.

However, northern states such as North Dakota may not see such opportunities immediately after planting, where a dry down is possible in the field in November and December further south.

"Therefore, North Dakota farmers may face the decision to leave the crop in the field for possibly several more months into March or April, or utilize rapid heat drying systems," says Parman. "While leaving the crop in the field can lead to losses from wind, snow and ice, attempting to harvest high-moisture crops leads to storage issues and severe discounts for selling wet crops, if they can be sold at all."

NDSU Extension experts estimate that drying corn could cost as much as 3 to 4 cents per bushel, per point of moisture reduced, at propane prices between $1.50 and $2.00 per gallon. In that case, drying corn down from 26% to 16% could cost as much as 30 to 40 cents per bushel, so it is properly conditioned for long-term storage.

"Seasonal price patterns for wholesale and retail propane in North Dakota show that price is typically highest beginning in October through January, and falls considerably to a low from April to June," says David Ripplinger, NDSU Extension bioenergy economics specialist. "In fact, propane prices are often one-third the cost in late spring and early summer versus fall and winter during harvest season. Current market prices are 90 cents to $1.10 for summer or fall delivery with flexible spot delivery occasionally falling to half that."

Ripplinger concludes, "One strategy farmers can employ is pre-pricing propane or buying and taking delivery if they have ample on-farm storage. This could save a farmer drying 100,000 bushels of corn $30,000 to $40,000 in years where harvested corn moisture levels are 10% above those needed for storage. This approach also eliminates the risk of delays or shortages if high demand overwhelms distribution."

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