March 1, 2016 -- Book UAN & Urea for Spring/Summer Applications

March 1, 2016 10:15 AM

 

  • Wholesale urea prices have bounced from the February low.

UreaChinese urea production has been increasing steadily over the past few years, reaching a fever pitch during summer 2015. Prices have been trending lower since May 2014 but have shown a tendency to firm slightly in response to seasonal demand. In February, the urea index at the Gulf firmed $30 after placing a low earlier in the month which will support higher Midwest prices.

  • UAN has gained popularity as part of preplant cocktails.

Whether it is with glyphosate or some other herbicide, UAN has been paired with liquid herbicides to save trips between the rows during spring burndown. As farmers look to increase efficiency in this tight margin spring, many will be looking for ways to save on fuel by minimizing trips across the field. That, along with growers wanting to replace some of what was lost if they applied fall nitrogen will support strong demand for UAN near-term.

  • UAN and urea are set to firm on the basis of early spring demand.

UAN

 

Farmers in the deep south are already hard at it and reports have surfaced that corn is emerged in Texas. UAN demand will increase as southern growers look to spoonfeed nitrogen on emerged crops. As Midwestern field activity picks up, farmers here will be applying preplant N at about the same time southern growers begin early sidedressing. These markets have been thirsty for fresh demand news and will firm as growers book product for application.

 

  • Both currently priced favorably compared to corn.

Urea is priced this week for $3.36 cash corn regionally; UAN28% is priced for $3.43 cash corn; UAN32% is also priced for $3.43 cash corn. Although margins are tight and corn prices are struggling for sustained price strength, at current prices, growers should consider urea and UAN a value as expected new-crop revenue holds a premium to both. By percentage, our regional average urea price is down 22.6% year-on-year; UAN28% is 19.6% below year-ago, and UAN32% is down 19% year-on-year

  • Stay hand-to-mouth on NH3 for the time being.

NH3Anhydrous ammonia prices have yet to forge a clear price low. We will wait for a signal that NH3 has exhausted downside potential before we pull the trigger. We may wind up booking hand-to-mouth for spring applications if the market wants to continue lower into spring. We feel the same on P&K right now.

Potash will continue lower near-term with no end in sight. Phosphates are a little harder to figure, but we believe weak demand from India on the basis of disappointing monsoons, and in Brazil due to weakness in the real will support global supplies and apply price pressure. Phosphate producers have maintained better production discipline than have potash producers which may put a floor under the market between now and spring, but the downside is limited by supply-side management at manufacturers.

Still, phosphate is overpriced compared to corn which may force DAP and MAP into price discovery mode to attract buyers. We will wait and see if that scenario plays out. As with anhydrous, we are waiting for the market to tell us it is set to firm. This week, only 4 of the states we survey are lower on phosphate which indicates the downtrend is still intact for DAP and MAP.

Summary:

Book 100% of your UAN and urea needs at today's price. Wait on anhydrous and potash, both of which may continue lower through spring fieldwork. Keep a close eye on phosphate prices, but for now we will wait and let phosphate prices come our way.

NiNdexes