Inputs Market Update: Eastern Belt Fertilizer Prices Pressure Averages

December 22, 2015 09:46 AM

 

Gains tallied $6.52 to Declines' $70.52 in the regional averages.

NciFertilizer prices took a sharp downturn this week, much of which is thanks to lower Eastern Belt prices. Michigan posted the greatest amount of declines with NH3, MAP, Urea and even farm diesel sharply lower in that state. Others declined as well, but no state noted nearly as much price pressure as did Michigan. Wisconsin, Ohio and Indiana were part of the Eastern Belt price cascade. Questions remain as to how far fertilizer can fall from here. When we see weeks like this when a few states weigh heavily on the regional average, we suspect the price moves are due to seasonal refill at lower prices, and corrective in nature.

That suggest the downtrend fertilizer has tracked since August may be coming to an end. Prices across the board are 10-15 percent below year-ago. Last year at this time we were watching prices beginning to re-inflate after mild harvest pressure. Anhydrous ammonia for example firmed about 20 bucks heading into the first of the year and then leveled off to arrive at a higher spring price. This year, we expect near-term softness in nitrogen to persist and for phosphate to continue declining to better reflect the rest of the fertilizer segment.

ureaUAN28% is our only fertilizer that firmed this week, led by Ohio. 28% had some room to firm as it dipped below the per pound of N price of anhydrous ammonia. As UAN28% firms to a level above NH3 by comparison, urea has softened down to a level that will put it right at parity with NH3. That is a significant move. We have waited for a long time for urea to correct lower. Since 28% already had its moment with NH3, we may not need UAN28 to remain below or even equal to NH3. As long as all four nitrogen products are near parity, we do expect nitrogen to follow corn prices more closely.

Phosphate still has some room to fall although this week was a good start. But as we said above, this week's sharp declines were led by Eastern Belt states acting in a corrective manner. That means the downtrend may have already run out of steam for phosphate. Potash is still oversupplied globally and likely has at least a few more dollars to fall before posting the price floor.

rubyCrude oil and heating oil prices remain very low as we open this week, and that continues to weigh on farm diesel prices. Propane responded to cooler weather in Minnesota this week firming 15 cents in that state.

Corn Futures -- December 2016 corn futures closed Friday, December 18 at $3.97 putting expected new-crop revenue (eNCR) at $625.33 per acre -- higher $1.68/acre on the week. With anhydrous priced at $625.53 this week, the eNCR/NH3 spread narrowed 16.56 points and now stands at 0.20. This means one ton of anhydrous ammonia is priced at a 20 cent premium to expected new-crop revenue per acre.

Using USDA's January yield peg of 171 and steady basis, expected new-crop corn revenue based on March 2016 futures at Monday's open at $3.74 totals $639.54 per acre.

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Nutrient/Fuel
12/7/15
12/14/15
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$645.45
$641.72
-$16.19
$625.53
Anhydrous
DAP
$534.53
$533.37
-$8.94
$524.43
DAP
MAP
$555.70
$554.82
-$17.44
$537.38
MAP
Potash
$412.27
$411.14
-$8.53
$402.62
Potash
UAN28
$293.77
$288.67
$6.50
$295.17
UAN28
UAN32
$317.94
$316.21
-$1.79
$314.42
UAN32
Urea
$410.91
$412.26
$17.58
$394.68
Urea
Farm Diesel
$1.96
$1.86
-5 cents
$1.81
Farm Diesel
LP
$1.03
$1.04
2 cents
$1.06
LP
Composite
651.70
648.75
-11.27
11.27
Composite