Inputs Market Update: Double-digit Gains the Exception

May 2, 2016 03:36 PM

 

Gains tallied $9.60 to Declines' 62 cents in the regional averages.

P_KIndexesDouble-digit increases were the exceptions and not the norm in this week's price survey. Nebraska NH3 was our overall leader to the upside firming $32.22 on the week but Nebraska NH3 is still priced below the regional average per-ton price. Michigan phosphate prices also posted double-digit increases with DAP up $11.95 and MAP up $14.02. As with Nebraska price action, Michigan DAP is still priced below the regional average price and Michigan MAP is just $5.00 above the regional average. That actually makes Michigan phosphate pricing fairly valued despite a significant jump this week.

The rest of our survey has the majority of states within a dollar of unchanged on various nutrients. At this stage of the game, that price action is encouraging and suggests at least some downside potential for summer prices.

NH3Our expected new-crop revenue spread is back into negative territory which makes our regional average anhydrous price a value compared to new-crop returns on corn. Farmers are ahead of the five-year average planting pace according to USDA and while scattered rains have put a damper on fieldwork in some areas, in general, the crop is off and running ahead of schedule.

That, of course, means fertilizer applications are ahead of schedule as well and the more time we have between spring and fall applications, the longer prices will have to soften before fall. If corn prices firm, we do expect fertilizer to follow the trend higher. We have seen fertilizer prices respond slowly to lower corn prices, and stand at attention when corn rallies. The fundamentals in the fertilizer markets however are still generally bearish with phosphate still our wild card.

DieselCrude oil and heating oil futures have retreated from highs tested last week and many suspect the recent rally in both was attributable to forecasts of robust demand growth for crude oil and fuels. Fund managers are betting on higher demand with long positions in crude and heating oil. If those forecasts do not come to fruition however, we would expect lower crude oil and lower farm diesel in response as traders reset positions.

Upcoming summer price action in fertilizer and fuels is yet to be seen, but at this point it looks as though the upside will be limited for fertilizers. Farm diesel will rely as much on the attitudes of traders as anything so we will be watching crude oil very closely through the summer for an indication of a diesel price floor for fall.

Corn Futures -- December 2016 corn futures closed Friday, April 29 at $3.95 putting expected new-crop revenue (eNCR) at $621.97 per acre -- higher 23.54/acre on the week. With anhydrous priced at $605.52 this week, the eNCR/NH3 spread widened 22.12 points and now stands at -16.45. This means one acre of expected new-crop corn revenue is priced at a $16.45 premium to one ton of anhydrous ammonia.

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Nutrient/Fuel
4/18/16
4/25/16
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$602.59
$604.10
$1.51
$605.52
Anhydrous
DAP
$484.98
$486.83
$1.85
$489.28
DAP
MAP
$500.94
$501.00
6 cents
$501.62
MAP
Potash
$356.76
$358.07
$1.30
$357.47
Potash
UAN28
$279.32
$279.81
49 cents
$280.71
UAN28
UAN32
$304.71
$308.87
$4.16
$312.17
UAN32
Urea
$375.42
$375.66
23 cents
$376.56
Urea
Farm Diesel
$1.59
$1.61
2 cents
$1.64
Farm Diesel
LP
$1.06
$1.05
-1 cent
$1.02
LP
Composite
594.39
598.26
2.04
600.30
Composite