The NFiles: Appetite for Risk Runs Out on Urea & UAN

March 2, 2016 11:25 AM


  • Anhydrous $153.76 below year-ago pricing -- lower $2.72/st this week at $562.53.
  • Urea $105.53 below the same time last year -- higher 94 cents/st this week to $361.10.
  • UAN28% is $66.44 below year-ago -- higher $2.56/st this week to $270.92.
  • UAN32% is priced $71.00 below last year -- lower 67 cents/st this week at $302.59.

We pulled the trigger on urea and UAN for spring and summer applications yesterday (click here for more). Both markets signaled they are ready to turn higher with wholesale urea values jumping more than $50 per ton at U.S. import terminals. Whether we are talking grains, crude or fertilizer, a lack of fresh demand news has been a wet blanket on price action in the past month. As spring fieldwork ramps up down south, growers will have to finally come to market and book fertilizer. That fresh demand news will light a fire that will start in urea and UAN and eventually spillover into other fertilizers.

UANAnhydrous is still locked in its downtrend which has lasted since harvest. Wholesale values suggest limited upside risk regionally for the time being and we are waiting for a clear low before we book NH3 for spring. There is room in our forecast for prices to continue to fall, or at least refuse to firm right through early spring fieldwork. I know some are beginning to apply anhydrous in Missouri where the weather is cooperating. We have not yet seen a price response in that state. In fact, in this week's price survey, only Minnesota and Indiana posted firmer anhydrous ammonia prices. All others were unchanged or lower. Contrast that with urea which shows two states lower as the rest are all higher or unchanged -- same deal on UAN solutions.

NH3Low natural gas prices and strong supplies are keeping a lid on anhydrous prices along with low-priced ammonia feedstock which leads me to believe farmers should continue to wait on NH3 while aggressively booking urea and UAN at current prices. Reports have been mixed on NH3 pricing across the nation with some farmers reporting a $20 price hike while others noted as much as a $40 price plunge. Since we are waiting to book NH3 and prices appear to be fairly variable by region and supplier, it is a good idea to contact your preferred retailer today and chat about anhydrous. As I said, some areas may firm slightly while other areas can still offer discounts on anhydrous so it is important to get in touch with your local contact and find out where supplies at your dealer are headed on price.

Our longer-term forecast calls for natural gas prices and increased domestic production to begin to weigh on nitrogen prices, and for nitrogen supplies to quickly outpace nitrogen demand in the United States.

December 2016 corn closed at $3.78 on Friday, February 26. That places expected new-crop revenue (eNCR) per acre based on Dec '16 futures at $593.39 with the eNCR15/NH3 spread at -30.86 with NH3 at a premium to December 2016 corn futures. The spread narrowed 10.73 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.38 1/4 per bushel.

Nitrogen pricing by pound of N 3/2/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.34 1/4
$0.43 1/2
$0.51 1/2
$0.58 1/4


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

Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
34 1/4 cents
NH3 5 cents
40 cents
5 3/4 cents
3/4 cent
NH3 12 cents
48 cents
13 3/4 cents
1 3/4 cents
NH3 10 cents
47 cents
12 3/4 cents
2 3/4 cents