The NFiles: Anhydrous Keeps Falling

January 15, 2016 01:16 PM


  • Anhydrous $114.27 below year-ago pricing -- lower $10.96/st this week at $591.80.
  • Urea $79.04 below the same time last year -- lower $5.96/st this week to $381.99.
  • UAN28% is $54.04 below year-ago -- lower $1.72/st this week to $279.00.
  • UAN32% is priced $45.57 below last year -- lower 39 cents/st this week at $312.92.

anhydrousNitrogen prices continue to erode and NH3 is still leading declines. Last week anhydrous was down $15 and this week, anhydrous is down another 10 bucks. This week's anhydrous price action pressured NH3 below $600 per short ton. Our margins have fallen apart just a little as anhydrous has outrun the rest of the segment. Import values will likely limit the amount of pressure anhydrous puts on UAN and urea for the sake of parity. Price action in UAN and urea has been driven recently by imports, but U.S. nitrogen production is set to take a leap forward in the coming months.

The fresh nitrogen production capacity will help free U.S. prices from nitrogen imports and may usher in an era of improved nitrogen prices compared to U.S. corn prices. That production increase will begin with natural gas prices at long time lows which will keep costs low for producers and for end users.

ureaDeclining imports resulting from increased domestic production along with low natural gas and ammonia prices will limit price strength in nitrogen near-term. Farmer demand is at a seasonal low which may inject an elemental of price pressure, but once growers begin booking spring product, we do expect some mild price strength in response. We expect the seasonal price floor to arrive sometime late in January, but since anhydrous has fallen so sharply in the past four weeks, the downtrend may take a few weeks to wind down. It would be uncommon for anhydrous prices to reverse sharply in just one week and our expectation is for prices to gradually flatten before retracing higher. That may push the seasonal price low into February.

We will keep our eye on nitrogen, but for now, we advise growers continue to wait for a clear indication of the winter price low.

December 2016 corn closed at $3.57 on Friday, January 8. That places expected new-crop revenue (eNCR) per acre based on Dec '16 futures at $558.09 with the eNCR15/NH3 spread at 33.71 with NH3 at a premium to December 2016 corn futures. The spread widened 32.74 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.57 3/4 per bushel.

Nitrogen pricing by pound of N 1/15/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.48 3/4
$0.48 1/4
$0.43 1/4
$0.59 1/4
$0.55 3/4


The Margins -- Anhydrous is once again underpriced compared to the rest of the nitrogen segment. NH3 shorts urea 1 cent by the pound of N; UAN28% is overpriced compared to anhydrous by 3/4 cent; UAN32% solution is 2 1/4 cents above NH3 on price.

Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
36 cents
NH3 5 cents
42 cents
6 cents
1 cent
NH3 12 cents
48 3/4 cents
12 3/4 cents
3/4 cent
NH3 10 cents
48 1/4 cents
12 1/4 cents
2 1/4 cents