DES MOINES, Iowa — The severe drought that has plagued much of the Midwest this summer has slowed both propane demand from and costs to growers now prepping to dry their damaged grain this fall, according to industry experts.

“Due to the hot and dry summer, there probably won’t be much demand for drying this fall,” said Deb Grooms, executive director of the Iowa Propane Gas Assoc. in Des Moines.

Despite 2009’s harvest being one of the largest crops and wettest Octobers in history, it was so drenched, U.S. growers used twice the amount of propane as normal to dry their grain, causing supplies to dwindle, as demand and costs increased.

Harold Hommes, executive officer of the Iowa Department of Agriculture and Land Stewardship’s agricultural marketing program, said, however, because of this summer’s drought, propane demand has dramatically decreased for the 2012 harvest season.

“I think that we will again see lackluster demand for propane from the agricultural sector this fall,” he said. “I am, in fact, very worried that if things don’t turn around soon here in Iowa, we will have very little demand.”

On the one hand, even in areas where drought is less of a factor, early planting and high temperatures this summer will keep propane demand in check for 2012, said Randy Miller, GROWMARK director of propane operations in Bloomington, Ill.

“Certainly, grain-drying demand will be reduced all over the Midwest, where even last year, we did experience some areas of heavy drying demand, namely in western Indiana and eastern Ohio,” he said.

On the other hand, propane inventories going into the 2012 harvest season “are in great shape,” Miller said, with the industry actually running low on storage space. In fact, as of early August, U.S. propane inventories stood at nearly 64.5 million barrels, some 27 percent over the five-year average, while Midwest stocks were at 27 million barrels, or about 18 percent above the five-year mark, Miller said.

To date, propane is used on more than 865,000 farms to power irrigation pumps, grain dryers, standby generators and other equipment, according to the National Propane Gas Assoc.

“Typically, inventories peak near the end of October,” Miller said, “then are drawn down throughout the winter months.

“Our industry is going through a period of change with all the production coming from the shale plays in the U.S., where not only is natural gas being produced in record amounts, but natural gas liquids, such as propane, ethane and butane, are being produced like never before.”

As a result, getting all products to demand areas is increasing the need for storage and pipeline space, which may affect propane availability in the future, Miller said. “But for this year, it’s hard to see any concerns for availability through the fall,” he explained.

Moreover, with Hess Corp.’s expansion in Tioga, N.D., under way, Hommes said he’s doubtful availability will be an issue this fall.

“Currently, that gas plant produces about three mbpd (million barrels per day) and is estimated to go to 18 mbpd in late 2013, I think,” he said. “It just seems to me that there is still a lot of downward pressure on natural gas and LP as supplies continue to grow.”

In turn, propane prices this fall will be significantly reduced from last year, Miller added, as lower natural gas prices due to increased shale production and lack of demand in the Midwest will keep downward pressure on them. Right now, the average retail cost of contract propane around Iowa for corn drying and agricultural heating is around $1.20-$1.40 per gallon, Grooms said, with some marketers even willing to give a volume discount if larger drops can be made.

“Retail propane prices could be 40 to 50 percent lower than last year,” she said. “As for supply, barring any pipeline issues, there should be ample supply.”

In fact, Anamosa corn grower Gary Edwards, 66, who’s been farming since 1978, said he’s never run short of propane in the past and isn’t too concerned about availability this fall.

“With the dry, hot weather, my yields are going to be down, but I don’t know how much yet,” he said. “If it remains hot and dry, my corn will be dry in the field, so I won’t take any gas.”