Inputs Market Update: Anhydrous Firmer but Still Cheaper Than Corn

January 25, 2016 12:01 PM

NH3SpreadGains tallied $4.61 to Declines' $11.83 in the regional averages.

The general trend of fertilizer prices was lower this week, but Anhydrous ammonia firmed for the first time since early December when NH3 firmed just 44 cents per short ton. The overall downtrend has been in place since mid-August and this week's $4.01 bump is the biggest price increase in regional anhydrous pricing during the length of that softer price path. South Dakota anhydrous prices firmed sharply this week, skewing our average to a degree, but Iowa, Illinois, Minnesota, Nebraska and Michigan all posted higher NH3 prices this week. Those state-by-state gains were all less than $6.25 per short ton, but given the length of time anhydrous has spent declining, this week's price increases stick out like a sore thumb.

Price increases also showed up In DAP and potash this week. Increases in potash prices may be in response to major production cuts announced in previous weeks as manufacturers Phosphagteare feeling the bite of lower K prices and slowing output to remedy the oversupply. Phosphate is overpriced compared to the rest of our fertilizer segment and while prices will need to soften sharply to align with our other fertilizers, acid prices and production fundamentals will keep a floor under this market between now and spring. Since DAP is higher this week as MAP fell, we expect DAP to soften next week as MAP firms slightly. If DAP and MAP both firm next week, we will pull the trigger on half of our spring phosphate.

Fuels were mixed with propane showing a penny's worth of Midwestern price strength. Farm diesel fell another penny the week to an average of $1.59 per gallon. Crude oil could not stick below $30 per barrel last week, but heating oil futures have performed very well considering the winter weather that struck the east coast over the weekend. If any region has the power to support heating oil futures through a blizzard it is the Northeast due to heavy reliance on heating oil for home heat. But futures are pointed back downward this morning and we see no indication from either crude oil or heating oil futures that diesel has placed a low.

DieselWe did hear from a farmer who was able to lock in diesel in bulk at $1.00 per gallon last week. If you can muster that price tag, book spring needs at that price.

In general, we expect fertilizer to soften slightly but it does appear the downtrend is flattening, and seasonally, prices tend to firm into spring beginning around the first of February. Diesel likely has a few more cents to peel off, but, as I said, if you can find a bulk price, we are in no mood to pick pennies below $1.10 per gallon. Be on the lookout for an ALERT from your InputsMonitor.com to book some spring fertilizer and fuel in the next few weeks. We expect higher fuels and fertilizer prices by the time wheels turn this spring.

Corn Futures -- December 2016 corn futures closed Friday, January 22 at $3.92 putting expected new-crop revenue (eNCR) at $616.92 per acre -- higher $11.76/acre on the week. With anhydrous priced at $591.70 this week, the eNCR/NH3 spread widened 7.95 points and now stands at -25.42. This means one acre of expected new-crop corn revenue is priced at a $25.42 premium to one ton of anhydrous ammonia.

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Nutrient/Fuel
1/11/16
1/19/16
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$591.80
$587.69
$4.01
$591.70
Anhydrous
DAP
$502.04
$499.45
4 cents
$499.49
DAP
MAP
$523.85
$520.55
-$4.64
$515.91
MAP
Potash
$382.76
$380.67
55 cents
$381.21
Potash
UAN28
$279.00
$277.38
-64 cents
$276.74
UAN28
UAN32
$312.92
$312.93
-88 cents
$312.05
UAN32
Urea
$381.99
$378.65
-$5.64
$373.01
Urea
Farm Diesel
$1.67
$1.60
-1 cent
$1.59
Farm Diesel
LP
$1.02
$1.01
1 cent
$1.02
LP
Composite
607.90
604.57
-1.84
602.73
Composite