P&KToday: Global Production Favors Inventory Build

March 24, 2016 02:23 PM

P&K softened on the week.

  • DAP $88.27 below year-ago pricing -- lower 27 cents/st on the week to $484.36/st.
  • MAP $94.82 below year-ago -- lower $1.68/st this week to $498.22/st.
  • Potash $125.29 below year-ago -- lower $2.76/st this week to $363.14/st.
  • The average cash corn price figured in to P&K this week is $3.44 1/2.
  • The national average corn basis slipped 2 3/4 cents from last week to 1/2 cent below May futures. The national average cash corn price declined just 1 cent from last week to $3.69. Basis is softer than the three-year average, which is 8 cents above futures for this week.

PotashWe are making no change to our short-term outlook for P&K -- slightly weaker into spring applications with demand fundamentals threatening to urge phosphate higher once farmers show up to book. Weakness in the Russian ruble and expanded production capacity in China and Morocco are leading phosphate producers in those nations to increase production, leaving North American producers in the dust in the fight for global marketshare. Russian phosphate producer PhosAgro reports, despite lower phosphate demand and prices, they are currently operating at a profit due to weakness in the Russian ruble.

That may seem counterintuitive as the ruble continues to soften against the U.S. dollar, and global fertilizer trade is done in U.S. dollars. But producing phosphate is a complicated process which involves several different feedstocks. Countries like Russia that can mine their own phosphate rock, produce their own ammonia and manufacture highly volatile sulfur are in a low cost environment. This favors profitable marketing of finished phosphate products like DAP and MAP as they offer up cheaply produced, ruble based product on the global market in the much stronger U.S. currency.

That has raised the level of available finished phosphates in the global market dramatically over the prior year, and with demand sagging in India and Brazil, the stronger inventory position favors U.S. on-farm phosphate prices.

PhosphateWe have to be careful here. So far, P&K have both acted as we have expected, but in the current environment of very weak U.S. demand, prices are likely to take advantage when growers do finally book for spring applications. Longer term, the unexpected surge in offshore phosphate production will pressure phosphate prices back in-line with the rest of the fertilizer segment by fall. I have suspected this spring might be an ok time to minimize phosphate applications in favor of potash, and expect increased phosphate production in China, Morocco and Russia to pressure phosphate prices for fall applications. Suppliers will continue to rely on imported finished phosphate since North American phosphate producers are marking time, playing prevent defense in the current P&K production war.

For now, we still advise a hand-to-mouth approach on booking P&K for spring with phosphate on an as-needed basis. Nitrogen prices have firmed, so get current with our advice to cover 100% of your spring/summer N needs at current prices.

 

By the Pound --

The following is an updated table of P&K pricing by the pound as reported to your Inputs Monitor for the week ended March 18, 2016.

DAP is priced at 50 1/2 cents/lbP2O5; MAP at 46 3/4 cents/lbP2O5; Potash is at 30 1/4 cents/lbK2O.

P&K pricing by the pound -- 3/24/2016

DAP $P/lb

MAP $P/lb
Potash $K/lb
 
Average
$0.50 1/2
$0.46 3/4
$0.30 1/4
Average
Year-ago
$0.60 1/2
$0.56 1/4
$0.40 3/4
Year-ago

 

PKIndexes