Inputs Market Update: Is It Time to Pull the Trigger?

Gains tallied a goosegg to Declines' $28.63 in the regional averages.

NH3Corn futures are lower to begin this week although Tuesday lent some moderate strength to nearby futures. The overall slump in commodities is not news. Fortunately for growers, fertilizer prices have followed commodities lower. In fact, fertilizer prices continue to sink even as crude oil struggles to confirm a low and corn futures post mild short-term strength. At this week's Leading Edge seminar in Omaha, Nebraska, we took an informal poll of the farmers in attendance, the clear majority of which indicated to me they would not cut back on fertilizer for spring. A few mentioned possible cuts to P&K with phosphate getting the short end of the stick, but overall, growers we surveyed stated clearly they do not intend to make major changes to their usual production methods this year.

On acreage mixes, we found the same to be true. Most growers indicated they would not make any major changes to corn/beans mixes, and would follow their regular rotation. This is exactly what I was hoping to hear. We have been in a low return environment in agriculture for much of the life Ureaof the Inputs Monitor. Farmers who are successful are less likely to make dramatic changes in response to lower grain prices and, rather, concentrate on maximizing what they do best.

Of course, the big question was is now the time to book fertilizer for spring. At Pro Farmer, we preach the value of knowing your cost of production. This lets farmers know when they can make sales and at what price level in order to turn a profit. Some farmers in Omaha lamented the fact that they had applied fall nitrogen when the market was much higher than it is today. Rather than worrying about that, that energy is better placed incorporating that fertilizer price into your marketing strategy. Know your cost of production to know the corn price you need to make sales at to make a profit.

The potential of a drought related grain price rally has been batted around quite a bit, and in times like these, rumors of a crop problem are a welcome line of thought. But, while I do believe optimism and positivity are important pillars of day to day life, there is no room in a marketing plan for blind optimism, or for hopes of a crop problem that may never come. You marketing plan must be based in the realities of current market conditions, and even the best analysts and weathermen can miss the mark when it comes to forecasts. The global grain oversupply will probably remain for corn, beans and wheat for another growing season. There will be opportunities along the way, but they may be short lived. That makes it all the more important to know your cost of production and the price at which you need to sell grains to keep your production in the black. Know those numbers well, and be ready to pull the trigger when the opportunity presents itself.

If are one who has trouble pulling the trigger on grain sales in the hope that prices will continue higher on a short-term bounce, rather than waiting for that next nickel higher, consider just figuring that extra nickel into your sell price and remain very slavish to that price point.

That was a long way to go to get to the answer about filling fertilizer for spring at this week's prices. On nitrogen, all four of our products are priced below expected new-crop revenue and should be considered a value. I have it on VERY good authority that UAN prices will come under pressure in the next week so I might offer up an opportunity to pick pennies there, but a far as anhydrous and urea go, now is a fine time to book, as long as your local price allows for a profit. Sub-$600 anhydrous is a go for me... $400 urea calls for $3.72 cash corn and all states in this week's price survey are priced below $400 per short ton. I'm a buyer on urea right now too.

Hold on phosphate for now. We are getting close to the potential for demand-based price strength at the retail level, but I would like to wait for better confirmation that phosphates have bottomed. Consider potash a value at current prices. Book vitamin K below $400 per short ton. We have word that India will be making dramatic cuts to potash imports this year as that major fertilizer consumer struggles with drought related problems. That may add pressure to P&K markets, but again, potash is priced at a good value right now and I'm a buyer of K this week.

DieselAll that said, I still have not issued official Inputs Monitor advice to book for spring. I guess I favor picking pennies as much as the next guy and I am waiting for an indication of a clear market low before going ahead with official advice. But, check your local bids and do not be afraid to book urea, NH3 and potash for spring at current prices.

Diesel was lower again on the week as global oil producers submit that they may freeze production at January levels. A production freeze will do nothing to pressure burdensome global stocks, but spring fieldwork will add support to farm diesel. This week again, however, no states post a firmer price on diesel.

Propane is unchanged here at mid-February although national stocks are in decline seasonally. We see nothing that will add major support to propane prices near-term.

Corn Futures -- December 2016 corn futures closed Friday, February 12 at $3.81 putting expected new-crop revenue (eNCR) at $598.43 per acre -- lower $13.45/acre on the week. With anhydrous priced at $580.85 this week, the eNCR/NH3 spread narrowed 10.34 points and now stands at -17.58. This means one acre of expected new-crop corn revenue is priced at a $17.58 premium to one ton of anhydrous ammonia.

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Nutrient/Fuel
2/1/16
2/8/16
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$586.60
$583.96
-$3.11
$580.85
Anhydrous
DAP
$499.58
$498.36
-$3.92
$494.44
DAP
MAP
$516.74
$512.17
-$6.16
$506.01
MAP
Potash
$382.15
$380.61
-$4.71
$375.90
Potash
UAN28
$276.28
$276.69
-$3.14
$273.55
UAN28
UAN32
$310.33
$310.33
-$1.68
$308.65
UAN32
Urea
$373.32
$371.28
-$5.89
$365.39
Urea
Farm Diesel
$1.56
$1.45
-2 cents
$1.43
Farm Diesel
LP
$1.02
$1.01
Unchanged
$1.01
LP
Composite
602.98
600.91
-2.07
$594.90
Composite

 

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