The NFiles: Domestic Supply Increase to Offset Tighter Global Ammonia

May 26, 2016 10:25 AM

 

  • Anhydrous is $119.88 below year-ago pricing -- lower 44 cents/st this week at $605.60.
  • Urea is $88.47 below the same time last year -- lower 70 cents/st this week to $378.19.
  • UAN28% is $59.08 below year-ago -- higher 86 cents/st this week to $282.58.
  • UAN32% is priced $55.34 below last year -- lower $1.14/st this week at $309.76.

AnhydrousNitrogen prices led our survey to the downside in this week's price action. UAN32% led nitrogen declines falling $1.14 by the short ton. Urea fell 70 cents and anhydrous is down 44 cents. Minnesota NH3 led state to state declines in nitrogen, falling $8.99 per short ton. Kansas urea was not far behind falling $7.09 and gains across the segment were very mild.

Seasonally, we expect nitrogen prices to soften gradually but firmer corn prices may limit the pace of decline. Internationally, ammonia supplies are beginning to tighten in the Middle East and North Africa which may give prices a mild lift. But ammonia out of Tampa is well below year-ago and trending sideways. We must also keep in mind increased domestic production which will limit the impacts of tighter international markets.

UreaUrea and UAN are each headed lower and sources report deferred prices are well below today's. Retail urea and UAN are pointed lower and while we not long ago were expecting sidedress activity to add support to UAN prices, it looks like the upside is limited near-term.

Anhydrous ammonia carries the bulk of the risk in the nitrogen segment but under current market conditions, we expect NH3 prices for fall to come in at least steady with today's price with a downside bias. Urea and UAN may be as much as $25 lower by the short ton by fall.

December 2016 corn closed at $3.99 on Friday, May 20. That places expected new-crop revenue (eNCR) per acre based on Dec '16 futures at $628.69 with the eNCR15/NH3 spread at -23.09 with anhydrous ammonia at a discount to expected new-crop revenue. The spread softened 2.12 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.54 1/4 per bushel.

Nitrogen pricing by pound of N 5/26/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.37 1/2
$0.41 3/4
$0.51 1/2
$0.48
Year-ago
$0.44
$0.51 1/2
$0.61
$0.57

 

The Margins -- UAN28% is overpriced compared to anhydrous by 1 cent; UAN32% solution is 1/2 cent above NH3 on price. Urea is 3/4 cent below anhydrous by the pound of N this week.

Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
0
37 1/2 cents
0
0
Urea
NH3 5 cents
41 3/4 cents
4 1/4 cents
-3/4 cent
UAN28%
NH3 12 cents
50 1/2 cents
13 cents
1 cent
UAN32%
NH3 10 cents
48 cents
10 1/2 cents
1/2 cent

 

Spreads