P&KToday: A Look at the DAP/MAP Price Spread

December 11, 2015 03:30 PM

 

The entire P&K segment was lower on the week.

  • DAP $42.03 below year-ago pricing -- lower $4.03/st on the week to $534.53/st.
  • MAP $38.59 below year-ago -- lower $9.71/st this week to $555.70/st.
  • Potash $67.49 below year-ago -- lower $5.98/st this week to $412.27/st.
  • The average cash corn price figured in to P&K this week is $3.84 3/4.
  • The national average corn basis is unchanged from last week at 3/4 cents below March futures. The national average cash corn price firmed 9 3/4 cents from last week to $3.73. Basis is firmer than the three-year average, which is 4 1/2 cents below futures for this week.
     

12102015PhosphateOur nitrogen margin analysis is well established and we have mined our data with great success and have been able to draw some necessary conclusions from our nitrogen price spreads. P&K spreads have been harder to figure for a variety of reasons, but we are honing in. This week, we turn our attention to the early stages of building our phosphate margin analysis. It would seem that the relationships between DAP and MAP prices should have something to offer our outlook, or at least help us gain a foothold in the near-term outlook.

This week, we have found that, for the life of the Monitor, the spread between the retail per ton price of DAP and MAP averaged 22.51. At the most basic level, this average spread figure gives us an idea of where DAP and MAP will look to settle. On the nitrogen side, our spread analysis has yielded the knowledge that when nitrogen margins are correct, nitrogen follows corn much more closely. That could turn out to be the case with phosphate as well, although production fundamentals carry a lot of weight in the sector at present.

12102015PotashThis week, our DAP/MAP spread is at 21.17. Remember, our average DAP/MAP spread over the life of the Inputs Monitor is 22.51. So DAP/MAP prices are in line with each other, but remain priced well above nitrogen and expected new-crop revenue. The narrowing of the DAP/MAP spread may or may not indicate future price moves. Time will tell. I suspect that, since the phosphate margins are thin currently with MAP at a rare deficit to the running average spread, phosphate may trend lower to catch up with nitrogen and corn. Again, time will tell.

Potash remains oversupplied and this week's 6 dollar falloff indicates the downside is wide open for vitamin K.

Near-term, P&K is uncertain, but feedstock prices for phosphate manufacture have improved. Since phosphate demand is uncertain and production fundamentals are showing signs of easing I expect phosphate prices to fade with MAP having the most work to do. Since the phosphate price spread so close to parity, the two may act together and fall sharply in the next few weeks. If phosphate were to fall to match anhydrous ammonia's $645 price tag from this week, DAP would be at $505 and MAP around $525.

By the Pound --

DAP is priced at 56 3/4 cents/lbP2O5; MAP at 53 1/2 cents/lbP2O5; Potash is at 34 3/4 cents/lbK2O.

The following is an updated table of P&K pricing by the pound as reported to your Inputs Monitor for the week ended December 4, 2015.

P&K pricing by the pound -- 12/11/2015

DAP $P/lb

MAP $P/lb
Potash $K/lb
 
Average
$0.56 1/2
$0.52 1/2
$0.34 1/4
Average
Year-ago
$0.60 1/4
$0.56 1/2
$0.40
Year-ago

 

12102015P_KIndexes