Short season, extra costs | Diesel supply may be a problem with a tight seeding window
Snowstorms and continuing cold temperatures are creating a potential disaster for prairie farmers if any of the systems they rely upon break down during seeding.
“Can the infrastructure handle this compressed seeding?” worried Dan Mazier, who farms near Justice, Man.
“How do you get that much energy out to the field at once, let alone the fertilizer?”
Farmers will need a steady flow of diesel fuel, fertilizer and other inputs when they are finally able to get the big iron moving. The short growing season means there will be no room for error.
That’s why some farmers are anxious about input supplies especially diesel fuel, which is becoming a chronic problem on the Prairies. Western Canada is normally considered to be energy rich, but it actually has a deficit in diesel fuel production.
“It is a big concern and it is probably going to be a concern for us at least for the short and medium terms,” energy market analyst Jason Parent of the Kent Group said during the Canada Grains Council’s annual meeting.
“Supply of diesel in Western Canada hasn’t kept up with the increase in demand in recent years.”
Parent said Western Canada had a diesel production surplus 10 years ago but now imports 40,000 barrels per day. The problem is that the prairie pipeline network is designed for diesel to flow out of the West rather than to flow in.
It creates a situation in which a pipeline breach or a refinery problem can immediately create a fuel shortage in much of the Prairies, as happened during the late stages of a recent harvest.
Most farmers don’t have enough on-farm storage to keep running through seeding or harvest without resupply, so in a year of tight seeding windows, the potential for problems becomes extreme.
Independent fuel dealer Chris Adair of Rack Petroleum in Biggar, Sask., said he doesn’t think there will be a problem as long as no part of the system breaks.
“This spring is a bit delayed due to all the snow out there, but the oilfields are breaking up for the season, the ice roads are going down, so supplies shouldn’t be fully taxed,” said Adair.
“Inventories right now are pretty good.”
However, that is true only if supplies keep flowing. A pipeline fire that caused a major disruption in November 2011 left the Prairies short.
“We got through that OK, but it was at the end of harvest. A month earlier and it might have been a different story,” said Adair.
It makes sense for producers to store 75 percent of their estimated fuel needs on the farm because it gives them a buffer against crisis, he added.
Mazier said many farmers don’t realize they probably need more fuel storage. Having a week’s worth of supply makes sense, but most farmers have far less than that.
The overreliance on one fuel is also worrisome. Almost everything runs on diesel, which is in short supply. That’s why it might make sense to adapt some farm machinery to natural gas, which is being done in other areas.
Mazier said Western Canada has a surplus of natural gas, with pipelines in many places, and handling the fuel wouldn’t be difficult for local fuel suppliers.
“That would be a whole different scenario,” said Mazier, who has a pipeline running through the middle of his own rural municipality.
“We have natural gas pipelines all over the place.”
Parent said the diesel deficit should abate within a few years. Massive refinery investment in Asia is going to make cheap diesel available to coastal British Columbia, which means the region probably won’t consume much prairie diesel in the future.
As well, expanding the pipeline from Alberta to Vancouver will take pressure off the rest of the prairie pipeline system and allow it to better handle all demands.
A major, three-phase diesel fuel production expansion is underway at Alberta’s North West Redwater Partnership, which Parent said should break the bottleneck.
“It’s going to offset the increase in demand if all three phases come online,” said Parent.
“Even if two phases come on line, (the situation will mostly be solved).”
However, the first phase won’t be completed until 2014, so there’s at least one year of risk ahead.