P&KToday: Weak Demand Prospects Pressure Phosphate Manufacturing

February 5, 2016 12:02 PM

P&K was higher on the week.

  • DAP $69.50 below year-ago pricing -- higher 9 cents/st on the week to $499.58/st.
  • MAP $74.56 below year-ago -- higher 83 cents/st this week to $516.74/st.
  • Potash $100.56 below year-ago -- higher 94 cents/st this week to $382.15/st.
  • The average cash corn price figured in to P&K this week is $3.58.
  • The national average corn basis firmed 3 1/4 cents from last week to 6 1/4 cents above March futures. The national average cash corn price firmed 5 1/2 cents from last week to $3.77 1/4. Basis is nearly in line with the three-year average, which is 7 cents above futures for this week.

PotashP&K prices were higher this week which may be a sign that some dealer demand has finally hit a marketplace starved for some fresh demand news. We expect very limited price strength for potash as global supplies will easily outweigh demand and consumption for at least a few months, and well into summer.

Phosphate is less certain since global supply management has been much more disciplined on the phosphate side. Manufacturers in the U.S. adjusted production lower as demand forecasts sagged, leading to a much tighter supply situation nationally. We may see soft production figures until corn prices give farmers a little breathing room as phosphate is often the first nutrient trimmed in the production budget.

Phosphate production fundamentals are improving as China eases taxes on phosphate rock and phosphoric acid which should eventually lead to an uptick in U.S. phosphate production. But P&K producers are solidly in a prevent defense mode and will not likely rev up production until corn prices improve.WTINH3K

In this week's TheNFiles, we spent a lot of time talking about how nitrogen is flying in loose formation with expected new-crop revenue. At right, I have included a chart comparing potash and anhydrous to WTI crude futures. Of all of the fertilizers we survey, potash has followed crude the closest, but the relationship breaks down when we look back past October 2015.

Since phosphate demand is the biggest question in fertilizer demand right now, corn prices will dictate how manufacturers proceed. Ironically, we do not expect phosphate prices to fall significantly until corn futures suggest to producers that demand will increase.

PhosphateConsider potash a good value at current prices but phosphate prices will likely hold steady. We maintain a slightly bearish view near-term for phosphate, but it will take time and better demand prospects before phosphate prices fall as low as nitrogen prices have.

If forecasts for a spring/summer drought in 2016 are realized, corn futures will firm and encourage phosphate production. That could mean we see a closer relationship between corn and phosphate prices by fall.

By the Pound --

DAP is priced at 52 cents/lbP2O5; MAP at 48 1/2 cents/lbP2O5; Potash is at 32 1/4 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 January 29, 2016.

P&K pricing by the pound -- 2/5/2016

DAP $P/lb

MAP $P/lb
Potash $K/lb
$0.48 1/2
$0.32 1/4
$0.59 3/4
$0.40 1/4