Inputs Market Update: Fertilizer Slows Downtrend, Fuels Firm

October 19, 2015 04:49 PM

Gains tallied 15 cents to Declines' $25.05 in the regional averages. Fuels were firmer on the week.

10192015NH3Fertilizer prices continued to soften this week but the rate of decline slowed slightly suggesting the end to the current fertilizer price downtrend may be drawing near. Last week, declines tallied $45.00. This week our declines tally $25.00 marking a roughly 45% slowdown week-on-week in the rate of decline. Harvest progress has continued at a breakneck speed and soon growers will be coming to market for fall nutrient. We expect end-user demand to support higher prices once demand is confirmed, but if growers hold out on fall applications hoping for cheaper fertilizer prices by spring, prices may drift sideways until buying perks up.

As the current downtrend in fertilizer prices continues, we see very little upward movement across our survey. Kansas prices are our biggest gainers, but those increases were mild.. Kansas NH3 is up $11.54 this week to $590.36, but still a good 60 bucks below our regional average price; Kansas potash firmed $9.45 and urea firmed $7.63 to $407.10 this week. Most other states were unchanged to lower across the Midwest.

The anhydrous chart above shows regional price action for the past three years. Last year at this time NH3 prices were placing a high that would stand until spring. The year before that, prices took until January to fully bottom and that was a slow, sloping dip that firmed beginning in March. Three years ago, anhydrous bottomed clear back in June and firmed sharply at the onset of harvest.

10192015PhosphateMAP is the nutrient priced at the top of our survey, as it has been for months now.

Looking out to the near-term forecast, we do expect fertilizer prices to bottom anytime now, but I have written that for a few weeks in a row. Importers and distributors were looking for a bottom weeks ago and that has not yet panned out. Wholesale prices have stabilized, but there has been a wide gap between retail and wholesale prices that is helping drive retail fertilizer prices lower currently. Once that disparity runs its course and retail prices more accurately reflect wholesale prices, we expect sideways price action with a strong bullish bias.

We may see prices run lower through the holidays and for now, we advise booking fertilizer hand to mouth for fall applications.

10192015DieselDiesel fuel is up a dime due to some refinery maintenance across the Midwest, mostly in the Eastern Belt, and that is where we saw increase this week. Ohio reported a 45 cent per gallon increase; Indiana is up 33 cents this week and Michigan firmed 32 cents per gallon. Since these increases were driven by refinery outages for various reasons, we believe most of those gains will be retraced, and diesel will come back down. Most other states were unchanged to 1-3 cents higher on the week.

Propane is up a nickel in response to cooler weather as we have expected, but our biggest gain here was a 6 cent per gallon increase in Missouri. We expect propane to steadily, mildly firm near-term.

 

Corn Futures -- December 2016 corn futures closed Friday, October 16 at $4.04 putting expected new-crop revenue (eNCR) at $636.72 per acre -- lower $9.83/acre on the week. With anhydrous priced at $652.76 this week, the eNCR/NH3 spread widened 0.30 points and now stands at 16.04. This means one ton of anhydrous ammonia is priced at a $16.04 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 $3.77 totals $644.67 per acre.

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Nutrient/Fuel
10/5/15
10/12/15
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$661.74
$657.50
-$4.74
$652.76
Anhydrous
DAP
$543.12
$535.23
-$1.62
$533.61
DAP
MAP
$569.25
$567.76
-$4.54
$564.71
MAP
Potash
$436.39
$431.24
-$3.48
$427.75
Potash
UAN28
$303.28
$301.38
-$1.39
$299.99
UAN28
UAN32
$337.04
$327.44
-$6.01
$321.42
UAN32
Urea
$429.92
$424.72
-$3.27
$421.45
Urea
Farm Diesel
$2.00
$2.00
$0.10
$2.10
Farm Diesel
LP
$0.99
$0.99
$0.05
$1.04
LP
Composite
674.74
668.67
-6.60
662.07
Composite

 

10192015Index