Inputs Market Update: Nutrient Firms Slightly as Planting Progress Surges

May 9, 2016 04:01 PM

 

Gains tallied $4.99 to Declines' 25 cents in the regional averages.

NCIToday USDA reported corn planting progress at 62% complete. That compares to the five-year average pace of 50% done by May 8.Weekend weather over the Central Midwest was ideal for planting and growers were quick to take advantage. We have even observed some fields emerged around Cedar Falls. The forecast calls for rain over much of corn country this week so progress is likely to slow, but in areas where possible, farmers will be turnin' and burnin'.

Last week our fertilizer price survey showed double-digit price gains were the exception and not the norm. This week is no different with only South Dakota NH3 and DAP up more than ten bucks. All other nutrients in al other states were within ten dollars of unchanged. UAN28% solution led to the upside with a $2.30 increase regionally. Beyond that, the average rate of gain regionally was 44 3/4 cents per short ton. Not too shabby given the time of year.

We expect anhydrous and urea to decline through summer with UAN trailing behind and then following the rest of the N segment lower once sidedress is wrapped up. Potash may stabilize here as North American producers look to stop the bleeding in K prices, but Russia and other major exporters will look to flood the market in an effort to maximize marketshare.

Phosphate prices need to come down, but it will be up to the global market to pressure prices since U.S. phosphate producers have aggressively managed domestic supplies.

dieselI'm swinging a little bullish on crude oil, heating oil and farm diesel for the time being although fund managers will likely take profits, and already today we have seen price softness in WTI after last week's upward climb. Traders placed record long bets on the market and at some point, since the general market fundamentals of global oversupply have not yet changed, they will bat it back down again via profit taking when the time is right.

I no longer foresee a test below $30, and $35 may even be overestimating downside potential. I do expect farm diesel to fall after another few weeks of short-term price strength. Farmer demand will wane, seasonal turnarounds will be wrapped up soon and farm diesel may give us as much as 15 cents back from its eventual high, depending on what crude oil does.

Overall, I favor lower fertilizer and slightly lower diesel through summer 2016. We will keep a close eye on the fundamentals, but forecasts for declines in fuels and fertilizer prices are prevalent among market watchers, and we see no reason to disagree.

Corn Futures -- December 2016 corn futures closed Friday, May 6 at $3.84 putting expected new-crop revenue (eNCR) at $603.47 per acre -- down $18.50/acre on the week. With anhydrous priced at $605.75 this week, the eNCR/NH3 spread widened 18.73 points and now stands at 2.28. This means one ton of anhydrous ammonia is priced at a $2.28 premium to one acre of expected new-crop revenue.

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Nutrient/Fuel
4/25/16
5/2/16
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$604.10
$605.52
23 cents
$605.75
Anhydrous
DAP
$486.83
$489.28
24 cents
$489.52
DAP
MAP
$501.00
$501.62
$1.06
$502.69
MAP
Potash
$358.07
$357.47
22 cents
$357.69
Potash
UAN28
$279.81
$280.71
$2.30
$283.02
UAN28
UAN32
$308.87
$312.17
-25 cents
$311.92
UAN32
Urea
$375.66
$376.56
89 cents
$377.45
Urea
Farm Diesel
$1.61
$1.64
5 cents
$1.69
Farm Diesel
LP
$1.05
$1.02
-1 cent
$1.01
LP
Composite
598.26
600.30
1.17
601.47
Composite

 

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