Food Service & Agriculture, Manufacturing, and Sustainability

Forecasting keeps propane supplier running

January 17, 2014
| By Pat Evans |
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A Crystal Flash customer woke up on New Year’s Day without any propane in her tank. She called the company, not expecting someone to pick up.

But someone did, and according to Vice President of Business Development Marc Foerster, the company was able to fill the tank and ignite the pilot lights to the water heater and stove.

Those relying on propane for heat likely have seen their supply dip after the recent cold streak, and some have seen their prices rocket skyward.

But Crystal Flash has seen its supplies stay level and continues to supply existing and new customers at a reasonable price, thanks in part to a great seasonal forecast, said Foerster.

“You can’t plan for a polar vortex,” Foerster said. “You have to have a solid purchasing plan.”

The propane industry is highly reliant on accurately planning for the winter season, which makes up for about 90 percent of its business. Propane companies try to contract out their supplies to guarantee prices for customers before prices are hiked in October.

The planning, however, is made difficult by crop drying and frigid winter storms, Foerster said.

The high usage period starts in the fall, when corn is run through propane-fueled dryers to make sure spoilage doesn’t occur in storage. This year, there was a larger-than-normal harvest paired with a wetter-than-normal season, he said.

“If it’s a fairly dry season, you can air dry it and put it in silos,” Foerster said. “But in a wet year like this one, you have to tumble it like a clothes dryer.”

Foerster said although it’s difficult to predict large, wet harvests or cold streaks like at the beginning of this month, propane suppliers use a prediction system similar to a farmer’s almanac that takes into account all the possible factors.

Still, years like this with multiple extremities can challenge the best storage plans.

“There are a number of companies who left themselves short,” he said. “We’ve heard that some other companies have said they’re on short supply, using more than 70 percent of their product already.”

Supplies are either guaranteed at a contracted price for a certain amount, or bought and sent to salt mine storage on the east side of the state.

“They can still get more, but it’s at the current price,” Foerster said. “We want to be able to … offer customers an assurance of what their costs will be. And we are sitting very well.”

Crystal Flash asks customers for a pre-purchase commitment and buys contracts based on those and predictions for the upcoming year. Those purchases are made in April through September.

What Crystal Flash is struggling with is the new demand of customers switching to the company from others that are raising prices due to low levels in storage. Foerster said there have been rumors that some companies are taking advantage of the situation and raising prices to raise their profits.

“If there were any issues with a supplier before this, then anything else and the customer wants to switch,” he said. “But, I also like to think it’s our people.”

Foerster said the challenge is getting new customers set up. The company can’t use the existing propane tank and has to schedule a time to install a new tank at the home or business. By law the new tank can’t be more than 10 percent full, so another truck has to follow up to fill the tank.

Servicing more than 30,000 clients has posed a logistical challenge for Crystal Flash, which has 25 locations throughout the state. The company has hired two new drivers to help comply with an hours-of-service rule put in place by the Department of Transportation. Drivers can only work four hours at a time before taking a mandatory break, according to the law.

Those drivers aren’t lost during the slow summer propane season either; Crystal Flash also provides diesel fuel for farm equipment and heavy construction equipment. Those demands are roughly inverse to the winter demands, Foerster said, and the preparation process is similar to that of propane.

The Crystal Flash planning team did a great job forecasting the need this year, Foerster said.

“You couldn’t plan for a wetter fall, can’t plan for a polar vortex; you just have to have a solid purchase plan using all the data points,” he said. “This year, we can satisfy all our existing customers and new ones.”

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