Inputs Market Update: Fertilizer Price Downtrend Slows

October 5, 2015 04:08 PM


Gains tallied $1.87 to Declines' $13.53 in the regional averages. Anhydrous ammonia, DAP and propane firmed on the week.

1052015AnhydrousFertilizer prices softened again this week but the downtrend slowed sharply as time runs out for pre-harvest prices. Anhydrous ammonia was led higher by Nebraska. Last year, Nebraska farmers were not part of the trend to drag their feet when booking inputs. The timing of harvest and post-harvest Nebraska weather last year were favorable for fall fertilizer applications and when I visited Omaha in December, most farmers I spoke to reported they had already applied preplant fertilizer. As harvest rolls on in Nebraska, demand may be the number one supporting factor, where other states are left wondering how much demand for fall nutrient they will find.

If Nebraska farmers at some point feel their price is too high, however, demand will likely fall short of expectations and pressure prices back down again after harvest. Most Other states were slightly lower or unchanged on NH3 and DAP, and wholesale prices are in decline. Anhydrous may still have some room to give to the downside on the basis of lower U.S. phosphate production. Since ammonia is one of the key feedstock ingredients in phosphate fertilizers, and since U.S. phosphate producers have said they will not increase phosphate production for now, that means there is more ammonia in the system which will be offered at competitive prices to nitrogen producers. As nitrogen production gets a boost from lower ammonia demand, wholesale prices on all nutrients continue to drift lower.

There is a strong possibility that fertilizer prices will remain depressed -- at or below current levels -- into the first of the year. We have expected fertilizer to bottom any time now, but prices continue to fade.

1052015ThreYearDieselFirmer crude oil prices still have not shown up in farm diesel as prices fell another few cents per gallon this week. We are 30% filled for spring diesel but as forecasts mount for higher fuels pricing in 2016, we will be watching closely for signs we need to fill more of our 2016 diesel ahead of a potential price increase. Propane firmed a penny per gallon as the autumn nip in the air became more pronounced last week. As more people reach for the thermostat and turn up the heat, propane prices will respond higher. We have also been hearing a lot about the overall dryness of crops coming in out of the field, but more and more reports are coming in about corn above 20% moisture right out of the field. Increased demand for grain drying will also add support to propane although most farmers have long since booked their winter 2015-16 LP needs.

Corn Futures -- December 2016 corn futures closed Friday, October 2 at $4.10 putting expected new-crop revenue (eNCR) at $644.87 per acre -- lower $1.68/acre on the week. With anhydrous priced at $661.74 this week, the eNCR/NH3 spread widened 1.30 points and now stands at 15.19. This means one ton of anhydrous ammonia is priced at a $15.19 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 December 2015 futures at Monday's open $3.89 totals $665.19 per acre.


Regionally --

Anhydrous firmed $1.30 to $661.74; UAN28 fell $5.99 week-over to $303.28; UAN32 fell $1.70 to $337.04; Urea is $2.31 lower at $429.92.

DAP is 56 cents higher on the week at $543.12; MAP fell 94 cents to $569.25; Potash softened $2.57 to $436.39. Farm diesel is 2 cents lower this week at $2.00/gallon. LP is a penny higher on the week at 99 cents/gallon.

Week-over Change
Current Week
$661.74 Anhydrous
56 cents
$543.12 DAP
-94 cents
$569.25 MAP
$436.39 Potash
$303.28 UAN28
$337.04 UAN32
$429.92 Urea
Farm Diesel
-2 cents
$2.00 Farm Diesel
1 cent
$0.99 LP
672.95 Composite