P&KToday: Phosphate Prices Set to Firm as Potash Supplies Build

February 19, 2016 12:29 PM

P&K was lower on the week.

  • DAP $86.65 below year-ago pricing -- lower $3.92/st on the week to $494.44/st.
  • MAP $88.61 below year-ago -- lower $6.15/st this week to $506.01/st.
  • Potash $109.25 below year-ago -- lower $4.71/st this week to $375.90/st.
  • The average cash corn price figured in to P&K this week is $3.52 1/2.
  • The national average corn basis firmed 1/2 cent from last week to 5 1/4 cents above March futures. The national average cash corn price firmed 7 1/2 cents from last week to $3.72 1/2. Basis is softer than the three-year average, which is 8 cents above futures for this week.

KIn the spirit of consistency, this week we compare our P&K prices with prices from the same time last year, as we did in this week's TheNFiles for nitrogen. A few points of interest here. First, when we compared urea prices to last year's prices at this time we noted a 22.2% year-over decline. Potash has fallen 22.5% during the same period. Urea has had a great influence over nitrogen pricing, but anhydrous clearly emerged as the nitrogen source that most closely reflected corn prices.

Potash has also been known to reflect corn prices very closely and is beginning to prove it knows a thing or two about the corn market. The table below shows that, as with urea, potash has outrun expected new-crop revenue to the downside. Potash producers have been scrambling to muster returns to shareholders and stop the bleeding in global potash markets. This week reports have come from India citing a disappointing monsoon season. In response, India announced it would curtail potash imports for the upcoming growing season. That will add more fat to the already bulging global potash inventory.

We expect urea to recover from its 22.2% falloff, but potash will now have to do so in the face of building stocks and waning global demand. Prices are likely to sag lower after spring fieldwork in the U.S. based on the supply overhang.

The second point of interest is the fact that expected new-crop revenue has fallen 18.0%. The P&K segment has fallen 17.43% overall during the same period. Much of that falloff was thanks to potash's influence over the P&K segment, but generally, P&K has done a fair job of reflecting declines in expected new-crop revenue.

P&K year-over declines

DAP

MAP
Potash
New-crop revenue
2/19/2015
$581.09
$594.62
$485.15
$725.68
2/19/2016
$494.44
$506.01
$545.05
$598.43
Percent of change
-14.9%
-14.9%
-22.5%
-18.0%

 

phosphagteMAP has been overpriced compared to the rest of our fertilizer segment for the life of the fertilizer price slide, but phosphates marched in line with DAP and MAP each registering a 14.9% falloff over the past year. That indicates phosphate does not care if MAP is overpriced because DAP is overpriced as well. Phosphate posts the smallest decline of all our surveyed fertilizers with UAN32% down 16.3% being next in line.

As with urea, phosphate wholesalers report an uptick in import prices and we expect mild, near-term price strength on the basis of demand for spring nutrient. We noted this week on the nitrogen side we are waiting one more week as we have caught wind of substantial UAN declines on their way. We will wait until next week before pulling the trigger on P&K as well, but we are up to the line, willing to give phosphates one more chance to settle a few bucks lower.

I have been saying it for a few weeks now, but potash is a value. There is downside ahead for potash, but spring demand may trump the supply side cushion and add mild short-term support to vitamin K.

As we said in our nitrogen commentary -- and I'm being a little redundant here to ensure clarity of message -- be ready to book next week for spring P&K.

By the Pound --

DAP is priced at 51 1/4 cents/lbP2O5; MAP at 47 1/2 cents/lbP2O5; Potash is at 31 1/2 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 February 12, 2016.

P&K pricing by the pound -- 2/19/2016

DAP $P/lb

MAP $P/lb
Potash $K/lb
 
Average
$0.51 1/4
$0.47 1/2
$0.31 1/2
Average
Year-ago
$0.61
$0.56 1/2
$0.40 1/2
Year-ago

 

INdex