Inputs Market Update: Revenue Gap Narrows to a Sliver

November 2, 2015 03:45 PM

 

Gains tallied $13.84 to Declines' $6.10 in the regional averages.

1122015NH3SpreadNitrogen was mixed on the week with anhydrous and urea lower and UAN solutions higher. Overall, the complex was slightly lower and the cash corn bid figured into nitrogen this week softened a quarter cent. Both DAP and MAP firmed this week as demand for fall applications is starting to heat up. Soil temperatures are just at the high end of where they need to be for anhydrous applications as far south as Missouri. Harvest is nearly over and demand prospects are improving for fall fertilizer.

It is believed that fertilizer prices are either at or very near the seasonal bottom. From here, prices are expected to run sideways, but may firm in areas where demand for particular nutrients is high. Nitrogen will remain in good supply but if you have not caught up with our advice to get covered on 30% of your spring fertilizer needs, now is the time.

On the P&K side, potash will continue sideways to lower near-term as retailers don't want to scare buyers away. MAP is still priced at a hefty premium to DAP and that should continue. Domestically produced phosphate is still priced at a premium to imported product although declines in industrial ammonia may pressure finished phosphate prices slightly.

1122015PhosphateOur general forecast calls for higher fertilizer prices by the time farmers begin spring applications although the downside may not yet be fully exhausted. It is not a bad time at all to book fertilizer for either fall or for spring however. Our spread between expected new-crop revenue and one ton of anhydrous is at an all time Inputs Monitor low at just 8.40. Last year at this time, that same spread was at a whopping 114.26, and fertilizer was wildly overpriced. If you can protect December futures at $4.15, fertilizer prices are right where they need to be. On the cash side, fertilizer is priced this week for a $3.87 1/2 cash corn bid.

Farmers are expected to drag their feet to market this year in hopes that fertilizer prices will better reflect corn price fundamentals. With the spread between expected new-crop revenue and anhydrous so narrow, fertilizer prices have definitely swung in favor of crop producers.

1122015RubyOn the fuels side, warmer weather has taken some of the steam out of propane prices which fell 3 cents per gallon regionally this week. Farm diesel was steady although a few of the states most dramatically impacted by refinery outages backed off slightly this week suggesting softness ahead for diesel. We usually see a dip right around Christmas and expect to issue an alert to book some ruby red for spring about that time.

Corn Futures -- December 2016 corn futures closed Friday, October 30 at $4.08 putting expected new-crop revenue (eNCR) at $643.44 per acre -- higher $8.40/acre on the week. With anhydrous priced at $650.25 this week, the eNCR/NH3 spread narrowed 9.22 points and now stands at 6.81. This means one ton of anhydrous ammonia is priced at a $6.81 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 $3.81 totals $651.51 per acre.

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Nutrient/Fuel
10/19/15
10/26/15
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$652.76
$651.07
-82 cents
$650.25
Anhydrous
DAP
$533.61
$534.77
67 cents
$535.44
DAP
MAP
$564.71
$563.57
$7.37
$570.84
MAP
Potash
$427.75
$425.09
-85 cents
$424.24
Potash
UAN28
$299.99
$295.04
$2.83
$297.87
UAN28
UAN32
$321.42
$324.05
$2.97
$327.02
UAN32
Urea
$421.45
$420.57
-$4.43
$416.14
Urea
Farm Diesel
$2.10
$2.11
Unchanged
$2.11
Farm Diesel
LP
$1.04
$1.05
-3 cents
$1.02
LP
Composite
662.07
660.95
1.87
662.82
Composite

 

1122015Index