US propane demand for corn drying delayed

Crop-drying demand for US propane is expected to come later than usual this season as spring flooding led to delayed midcontinent harvests.

Expected corn production for grain in the 18 major corn-growing states is expected to be 4pc lower than last year, at 13.8mn bushels, according to the US Department of Agriculture's (USDA) August crop production outlook. In Iowa, the largest producer of corn, 90pc is at the dented stage or beyond — 17 days behind 2018 and two weeks behind the five-year average — while only 2pc has been harvested, 11 days behind the average, according to the latest USDA data.

Despite the harvest delay and what has traditionally been an increase in demand for propane for crop drying, midcontinent propane stocks are lower than normal this year. Stocks were 27.5mn bl for the week ended 27 September, according to the US Energy Information Administration (EIA), down by 272,000 bl from last year.

The lower stocks are due to strong southbound demand for propane into the export markets on the US Gulf coast, coupled with additional Atlantic coast exports when the 250,000 b/d Mariner East 2X NGL pipeline comes online this quarter.

That increased pull for export helped give Conway, Kansas, propane an average 6¢/USG discount relative to Mont Belvieu, Texas, in September — a far narrower north-south arbitrage than in September 2018, when Conway stood at a 28.27¢/USG discount to the Gulf coast.

Overall, US propane stocks are up by 27.8pc from year-ago levels given steady production of more than 2mn b/d, according to the EIA, leading to lower prices relative to last year. US stocks are expected to build well into October, despite pockets of cold weather seen in the northwestern US.