As winter approaches the broiler belt, it brings with it increased heating fuel bills for poultry growers. Most modern poultry houses in the southeast use liquified propane (LP) or natural gas (NG) to keep birds warm during the winter months, as well as during brood phases year-round. In many areas of the southeast, growers can choose one fuel over the other. However, this is a long-term choice requiring equipment conversions and plumbing changes. The cost of heating their poultry houses is usually a primary driver of this choice. LP and NG prices have proven to be volatile at times. Historically, LP price lags but roughly follows crude oil price changes, as it is a by-product of crude oil production. NG prices also have a crude oil production component but react more to international events and trading. The development of domestic gas fracking has made it more available and advanced NG as a competitor to LP in the U.S. However, access to NG pipelines is a limiting factor for many poultry producers. Also, NG customers generally do not have the ability to lower costs via pre-purchase agreements, volume purchases, or other negotiated price strategies that LP users have. Natural gas users simply pay the provider’s price at the time of billing. LP users must monitor fuel stocks and schedule deliveries to maintain adequate supplies at the farm. NG users do not have this worry as they always have pipeline access to gas. Hence, there is also no storage cost to consider when using NG. Farm trials have shown that, if NG is readily available, and prices are at their normal comparative levels, it is generally less costly to heat a poultry house with NG. But with recent NG price volatility, this could vary.
When comparing the costs of these two fuels, it is important to compare them on an equal basis in terms of heat energy output per unit. For this, British Thermal Units, or btu’s per unit is used. (One btu is roughly equivalent to the heat of a single matchstick flame.) LP is traded and sold to growers by the liquefied gallon and contains approximately 91,452 btu’s per gallon, with slight variations in actual product delivered. NG is traded and reported in one thousand cubic feet (MCF) units, which equals one million btu’s. It is often sold to retail customers by the “therm” or CCF (one hundred cubic feet), which is 100,000 btu’s of energy. For a quick comparison, you can take the LP price, multiply that by 1.093 and get the rough equivalent price of NG on a per btu basis. For example, if NG is priced at $1.17/CCF or $11.70/MCF (current trend price in Fig 1a), LP would need to be priced at approximately $1.07 per gallon to be equal in cost per btu. LP has not been at that low of a price in the southeast in recent history. Conversely, $1.20/gallon LP (trend forecast price in Fig 2b) is roughly equal to $1.31/CCF natural gas. Recent history has shown that NG prices are trending below that level, but from the spring of 2022 to the spring of 2023, prices were well above the trend, with commercial rates hitting a high of $1.45/CCF in September ‘23. LP prices at that time were approximately $1.52/gal ($1.66/CCF equivalent). These were the national averages; some users may have paid higher local rates for either fuel. Some local providers have varying rates for farms versus residential or commercial for LP or NG. Although NG has generally stayed on the less expensive side of this relationship, it may not always be the case for a specific farm or specific providers.
When looking at these variations, it is important to note that LP prices tend to react more to locally occurring events like weather and the short-term impacts of those events on supply than NG. However, the overall U.S. supply of propane does affect the market prices nationwide, as seen in figures 2a and 2b below. Luckily for poultry growers using LP, the current U.S. supply is strong and suggests lower winter prices are possible this year. NG is widely traded internationally, and prices are more reactive to international events like the war in Ukraine or Chinese economic strength and purchasing of the commodity. Even so, NG prices are forecast to remain soft for the coming winter as U.S. production looks strong and growing (fig 1b). Overall, with propane stocks high and natural gas production strong, U.S. poultry growers may be getting a welcome relief this winter from the high fuel costs of recent years, no matter which fuel source they choose.
NOTE: Any poultry grower considering making a switch from one heating fuel source to another needs to consider all costs, both short and long term, like equipment changes, plumbing upgrades, and pricing flexibility. Click HERE for detailed information on NG conversion in poultry houses.
Fig. 1a & b: Natural gas prices have been volatile recently in response to international events and trading. However, long-term forecasts are lower than the high prices of 2022. U.S. production looks to be strong and increasing over time.
Brothers, Dennis. “Comparing Liquified Propane to Natural Gas for Heating Fuel Cost Management in Poultry.” Southern Ag Today 3(48.3). November 29, 2023. Permalink