Inputs Market Update: Still Waiting for the Fertilizer Price Floor

February 22, 2016 03:35 PM

Gains tallied zero to Declines' $52.67 in the regional averages.

NCIFertilizer prices continued to drill down this week. Wisconsin corrected sharply to the downside, but even without that heavy downward influence, fertilizer prices would have been lower anyway. Anhydrous ammonia was our biggest decliner falling $15.60 during the report week. Wisconsin fell hard, but only Nebraska and Missouri post a firmer price. It was really the same story across our survey with the majority of states in all fertilizers at least slightly lower. This week's price action is messing with our outlook a little. We have been watching fertilizer's downtrend become more shallow with each passing week and eventually, prices will bottom and the downside will be exhausted.

Last week we thought this would be the week prices would indicate a bottom. That has not panned out -- with or without Wisconsin's kamikaze run -- and we will wait another week before pulling the trigger as there may be a few more dollars to save here.

DieselSame deal on the fuels. Wisconsin was less of a factor in our regional averages on fuels. Farm diesel and propane are both unchanged this week. Crude started the week with a much firmer tone, but I expect WTI will remain rangebound between $27 and $50 per barrel as the supply side cushion is still extremely fluffy. News of a production freeze at the behest of Saudi Arabia and Russia at January levels won't do much to trim the global oversupply as January noted a 32.4 million barrels per day production pace. That's above the prior production high from OPEC at 30 million barrels per day. Meanwhile, U.S. production continues to pump along above 9 million barrels per day.

We do view farm diesel prices as having some upside risk as agricultural demand will soon add an element of short-lived support. After spending some time preparing for this week's Farm Fuels in Focus, I may change my mind and issue an ALERT to book ruby, but at present, we expect sideways pricing into next week on diesel.

Be advised Nebraska and Missouri readers... your states are higher on NH3 this week which may be a signal of farmer demand entering the market. We have long believed demand for spring/summer applications will be what puts the kibosh on fertilizer's bear run. Nebraska and Missouri are typically the first in our survey to indicate early fieldwork is underway, and if you have not yet booked spring nutrient in those states, consider doing so this week before demand urges prices higher.

Corn Futures -- December 2016 corn futures closed Friday, February 19 at $3.86 putting expected new-crop revenue (eNCR) at $606.84 per acre -- higher $8.41/acre on the week. With anhydrous priced at $565.25 this week, the eNCR/NH3 spread widened 24.01 points and now stands at -41.59. This means one acre of expected new-crop corn revenue is priced at a $41.59 premium to one ton of anhydrous ammonia.

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Nutrient/Fuel
2/8/16
2/15/16
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$583.96
$580.85
-$15.60
$565.25
Anhydrous
DAP
$498.36
$494.44
-$5.11
$489.33
DAP
MAP
$512.17
$506.01
-$9.88
$496.13
MAP
Potash
$380.61
$375.90
-$6.27
$369.63
Potash
UAN28
$276.69
$273.55
-$5.19
$268.36
UAN28
UAN32
$310.33
$308.65
-$5.39
$303.26
UAN32
Urea
$371.28
$365.39
-$5.23
$360.16
Urea
Farm Diesel
$1.45
$1.43
Unchanged
$1.43
Farm Diesel
LP
$1.01
$1.01
Unchanged
$1.01
LP
Composite
600.91
594.90
-10.52
584.38
Composite

 

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