The Record’s Ag Report
Technology and related services have come a long way in the agriculture industry in recent years. A new service available is the automated fuel delivery system.
Northern Plains, a division of CHS in Gettysburg, S.D., and North Central Farmers Elevator, which is headquartered in Ipswich, are cooperatives providing automated fuel delivery.
Northern Plains utilizes the Cenex Automated Fuel Delivery System, and North Central utilizes the Level Management System offered by CHS. The difference between the two systems is that Northern Plains receives all the benefits of the Cenex Automated Fuel Delivery System while North Central has its own delivery/dispatching system.
The Cenex Automated Fuel Delivery System includes a fuel sensor and monitoring system that is installed in the fuel tank. When fuel drops below a predetermined level, the monitor sends a refill signal to the fuel distribution center, and a truck is dispatched to fill the tank.
At Northern Plains, the monitor placed on the tank reads the level of fuel to the tenth of the gallon from a cord that is suspended from the monitor. Each day, the reading relays the signal to a controller, and that information transmits to a phone line that connects into CHS computers.
“It is fantastic,” Northern Plains Energy Manager Kent Borstad said. “The requests and responses for these monitors have been overwhelming.”
Borstad said there are many benefits for the producers and their cooperatives.
“For the producers, the fuel is there when they need it the most, and they do not have to pay for it until they use it,” he said.
It saves time for farmers as they no longer need to check their fuel tank levels or wait for deliveries. They do not have to call to order fuel as the monitors accurately measure the fuel supply every day and automatically trigger a delivery order when the fuel level drops.
The system also provides the ability to improve a producer’s cash flow by having different payment options.
The most popular payment option is the deferred. Each month, the monitor estimates the amount of product used, and the customer is billed for that amount, even though the tank is kept at a seasonal level.
Customers can also choose to be billed at delivery or contract a fixed price. They can choose to buy out the fuel in their tank at any time or put a hold on the tank when not in use.
Another choice offered is average monthly pricing. For those who choose this pricing option, the price they pay for fuel is equal to the 30-day average price of fuel for the billing cycle in which they actually use the fuel.
“This has proven to be an advantage whether it’s an up market or a down one,” Borstad said. “Plus, you always have the option to own the fuel in your tank at any time if you like the current price.”
Borstad said it can substantially reduce the price risk in volatile markets (up or down). Rather than paying the price posted on the day the fuel was delivered or used, clients are charged the average price for that entire month.
He said questions that are asked by clients are “Will I still be buying locally?” and “Who will deliver my fuel?”
“This system is a collaboration between Northern Plains and CHS our Cenex® fuel supplier. Northern Plains customers buy locally and receive personal service and billing from Northern Plains. However, the Cenex® fuel will be delivered by CHS,” Borstad said.
The trucks that deliver the fuel through Cenex Automated Fuel Delivery System are bigger than the trucks that were delivering before. Northern Plains has a network of five trucks that cover their area. The trucks are 7,000-gallon tanker trucks with seven axles and are owned by CHS.
“So the difference is that CHS is delivering the product, and that is all that has changed as we still have the interaction with our customers,” Borstad said.
He said producers are also able to control their fuel supply management and can log onto a website 24/7 to check their tank levels and their current and historical fuel usage.
“It has been a win-win situation for the producers and us,” Borstad said. “We are able to reduce our delivery costs by delivering more, less often.”
North Central Farmers Elevator Area Transport Driver Lee Schlosser said farmers really like the automated system they offer and especially appreciate it during spring and harvest times when fuel can be difficult to get on short notice.
“I get a reading daily and get those tanks filled up so they do not have to worry about running out,” Schlosser said.
Schlosser said it not only saves time, but it also benefits the farmers as they can take advantage of the different payment options.
“They appreciate not getting that huge fuel bill all at one time,” he said. “Plus, they have the option to buy out any amount of that fuel when they choose when the price is right for them.”
Schlosser said they have a full capacity of trucks to offer the system to clients. There are three semis with 6,500-gallon tanker trailers, four 4,500-gallon tanker trucks, one 8,500-gallon tanker and two smaller trucks.