Inputs Market Update: Fertilizer and Fuel Prices Plummet

January 4, 2016 04:05 PM


Gains tallied $0.00 to Declines' $42.87 in the regional averages.

PhosphateAll fertilizers and fuels were lower for the second consecutive week. Anhydrous continues to lead to the downside and the really exciting news in this week's price survey is, despite falling corn prices, anhydrous ammonia outpaced corn's declines and the gap between the two narrowed to just 97 cents. So as corn prices have fallen, NH3 has fallen farther, faster. How much lower anhydrous will fall is still in question but only one state firmed this week -- Kansas NH3 gained $2.97 per short ton to a statewide average of $582.55. On the other hand, South Dakota anhydrous fell $88.18 on the week, and four other states were at least $15.00 lower on the week.

We believe fertilizer swill continue to fall, but NH3 is bound to level off here soon. Continued price pressure in the fertilizer segment will likely come from phosphate although as anhydrous has fallen, it has widened the margins between our surveyed nitrogen products. Those margins have acted like they want to be narrow of late so either anhydrous will firm to rejoin the rest of the segment or UAN and urea will soften to NH3's level. UANUrea may have already given all it can give, especially if Chinese producers set themselves about the business of righting the global urea oversupply in an effort to bolster prices.

Phosphate and potash too some big steps lower this week with Ohio DAP down nearly $40 and Minnesota MAP and potash down $20. Of all the fertilizers we survey, potash is at the bottom of the price curve although the globe is currently awash with vitamin K and until that situation is remedied, farmers will continue to benefit from affordably-priced potash. Phosphate is a different story and we are glad for any declines that come down the pike. The margins between DAP and MAP suggests a closer reflection of cash corn pricing ahead, but since the United States is still heavily reliant on imported supplies, global fundamentals may limit the downside for phosphate. Both DAP and MAP need to shave off about another $20 per short ton in order to catch up with the rest of the fertilizer segment's low prices and that may be a stretch.

RubyWe expect the low in phosphate to be placed in late January to early February and we will book accordingly at that time.

Diesel keeps falling and there is little support in sight. When diesel prices are near a price floor and set to firm, we generally see most states hover around unchanged. This week, seven of our twelve surveyed states have posted declines suggesting the downtrend will continue well into winter. Stay hand-to-mouth on diesel. Meanwhile, propane fell another 3 cents despite some dramatic winter weather and sharply cooler temperatures in the Midwest. Minnesota is to thank here, falling 16 cents per gallon to an even dollar statewide. In the case of LP, this week ten states are unchanged as just two states softened. I believe a similar amount of states will come in unchanged as a few firm slightly before prices take off to the upside. Price support, however, will be extremely limited by very high U.S. propane supplies, and we do not expect much of a runup near-term.

Corn Futures -- December 2016 corn futures closed Thursday, December 31 at $3.83 putting expected new-crop revenue (eNCR) at $601.79 per acre -- lower $10.09/acre on the week. With anhydrous priced at $602.76 this week, the eNCR/NH3 spread narrowed 5.56 points and now stands at 97 cents. This means one ton of anhydrous ammonia is priced at a 97 cent premium to expected new-crop revenue per acre.


Week-over Change
Current Week
-21 cents
Farm Diesel
-5 cents
Farm Diesel
-3 cents