Inputs Market Update: Fertilizer Prices Turn Back

November 16, 2015 04:27 PM

11162015NH3

Gains tallied $1.00 to Declines' $10.46 in the regional averages.

Fertilizer prices reversed course this week after having firmed the past two weeks in a row. The outlook for nitrogen has improved in recent weeks and UAN's price movement this week basically erased what was gained in upside action over the past weeks. Granted, price volatility has thinned lately, and it hasn't taken much to erase gains in UAN pricing. Meanwhile, anhydrous ammonia is down just four cents per short ton this week and urea is down just over a buck. In fact, our entire nitrogen segment is down this week, however slightly.

MAP was our only gainer on the nutrient side, and that aligns well with our own opinions and reports we have gotten from industry experts that phosphate will be our greatest source of risk for the time being. That is due to shaky fundamentals which have manufacturers signing short-term commitments with feedstock dealers who have noted extreme volatility in phosphoric acid prices. Until the global acid shortage is remedied, phosphate prices will remain volatile with MAP exhibiting much of the upside price risk. 11162015PhosphateMeanwhile, potash supplies remain strong globally, and prices do not seem to have much urging them higher right now. Uralkali did say last week that it intends to curtail production in order to rebalance global supplies -- the same Uralkai that split from their partners in Belarus just a few years ago to adopt a volume-over-price strategy. It would seem global price pegs have Uralkali rethinking volume-over-price. That is a sign of just how much potash is available in the world right now, and that will limit upside risk in potash near-term.

Corn futures took some of the wind out of expected new-crop revenue this week thanks to USDA's reports from last week. The spread between fertilizer prices and corn prices grew after falling to less than ten dollars. Since we believe that near-term upside risk for nitrogen is limited, support for corn futures would remedy the disparity. In fact, our nitrogen margin analysis reminds us that since nitrogen margins are thin, nitrogen prices may better reflect corn prices in the weeks ahead.

11162015DieselFuels are acting as we had expected and as seasonal maintenance is completed and supplies recover locally, we find a few of the states that led diesel higher falling this week. Ohio is the first of our eastern Belt states to retrace what amounts to a localized price spike, falling 39 cents this week. Indiana and Michigan are each down 5 cents this week. We take that as an indication that farm diesel prices will return to the $2.00 per gallon level regionally.

Cooler weather and snow events here and there deposited a penny's worth of support under propane, although we are roughly 60 cents per gallon below the same time last year. Look for propane prices to be limited by bulging Midwest storehouses but subject to localized price support based on the weather.

Corn Futures -- December 2016 corn futures closed Friday, November 13 at $3.87 putting expected new-crop revenue (eNCR) at $612.86 per acre -- lower $18.82/acre on the week. With anhydrous priced at $648.39 this week, the eNCR/NH3 spread widened 18.78 points and now stands at 35.53. This means one ton of anhydrous ammonia is priced at a $35.53 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 at $3.58 totals $612.18 per acre.

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Nutrient/Fuel
11/2/15
11/9/15
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$650.25
$648.43
-4 cents
$648.39
Anhydrous
DAP
$535.44
$540.41
-$1.89
$538.52
DAP
MAP
$570.84
$570.69
99 cents
$571.68
MAP
Potash
$424.24
$423.92
-$2.08
$421.83
Potash
UAN28
$297.87
$298.09
-$1.99
$296.10
UAN28
UAN32
$327.02
$327.51
-$3.37
$324.13
UAN32
Urea
$416.14
$415.40
-$1.03
$414.37
Urea
Farm Diesel
$2.11
$2.12
-5 cents
$2.07
Farm Diesel
LP
$1.02
$1.04
1 cent
$1.05
LP
Composite
662.82
663.41
-2.44
660.98
Composite