High fuel costs a burden for drying grain

High propane and natural gas costs loom ominously over growers and grain dryers. 

According to Ron Campbell, operations and member service manager with the Ontario Agri-Business Association (OABA), the upward trend of per-bushel drying costs is a universal concern for the province’s grain elevators. While specific numbers for fuel are hard to identify, particularly propane, which is sold privately, Campbell says OABA members continue to see year-over-year increases in fuel costs. 

Why it matters: Fuel is the most significant grain drying-related expense. It’s also the expense that has seen the greatest increase.

One propane representative recently told Campbell their company has experienced repeated cost increases of 30 per cent. The issue for both natural gas and propane stems from a variety of factors, including tight inventories in the United States and challenges with shipping liquified gases to Asia. 

Those factors led to challenges across the world, including in the United Kingdom where natural gas costs caused a major nitrogen producer to cease operation. 

“From the drying and grain elevator perspective, every cost centre has gone up, but fuel has gone up the most. It’s the biggest single cost centre in drying,” says Campbell. 

“We recommended to our members to monitor their costs and adjust accordingly, but I don’t think anyone will be able to cover those costs without pricing themselves out of the market.”

Rob Gamble, senior economist with Grain Farmers of Ontario, says specific fuel prices are hard to identify since they vary from day today and by location. In terms of Ontario grain dryer use, general estimates suggest a 60-40 split between natural gas and propane, with propane more expensive than natural gas.

Using GFO’s Grain Drying Costs Calculator, Gamble provided an example of how market prices and the federal carbon charge can affect drying costs. 

He noted 500 acres of corn at 175 bushels per acre results in 87,500 bushels, or 2,223 tons. Assuming 10 points of moisture must be removed, and 3.4 litres of propane are required to remove one point of moisture per tonne, 75,569 litres of propane will be required.

• At 90 cents per litre, the cost is $68,012.

• The forthcoming 2022 carbon charge at $50 per tonne of GHG adds an additional $5,857, which translates to $11.71 per acre.

• At 2030 carbon charge levels ($170 per tonne GHG), costs reach $40 per acre.

Using the same metrics, the cost to dry 500 acres of 175-bushel corn by 10 moisture points with natural gas is $51,120, based on a cost of 19 cents per cubic metre and 2.3 cubic metres requirement per point of moisture, per ton. In 2022, the carbon charge adds $4,997.

If these metrics are extrapolated to the province as a whole and combined with the 60-40 split in fuel type, Gamble says drying Ontario’s two million acres of grain corn costs $132.1 million and the total carbon charge tallies at $21.36 million.

“If we do that same scenario and we had a wet year where people take corn off at 28 per cent, it jumps to nearly $28 million in 2022, and nearly $95 million in 2030, just for carbon charge on two million acres of corn,” he says. 

“We had cases last year where the carbon charge was almost as high as the cost of natural gas. That really was upsetting for a lot of [grain dryers]. The charge is not a proportional charge on the cost. It’s a volume charge. It doesn’t matter what the price of fuel does, the carbon charge remains the same in terms of calculating cost.”

The challenges brought by high market prices and government policy could be offset with alternative drying methods. However, Gamble says there is little technology to replace fossil-fuel grain dryers. Significant investment in current systems is another complicating factor.