The NFiles: Lower Prices Prompt Alert

September 16, 2015 09:48 AM

9162015NH3

  • Anhydrous $31.71 below year-ago pricing -- lower $12.97/st this week at $669.14.
  • Urea $62.47 below the same time last year -- lower $2.02/st this week to $446.59.
  • UAN28% is $20.56 below year-ago -- higher 73 cents/st this week to $313.70.
  • UAN32% is priced $4.32 above last year -- lower $5.50/st this week at $352.07.

Nitrogen prices fell this week with the exception of a slight increase in UAN28%. Anhydrous ammonia led gains across our survey this week thanks to sharply lower prices in northern states and Missouri. Ammonia 9162015Ureasupplies are a bit uncertain as there are factors working for and against U.S. supplies. Working against domestic supplies are turnaround in a few eastern nitrogen production facilities. That may be a sign that producers expect lower fall demand and suggests that once scheduled maintenance is complete, the supply situation will loosen slightly and pressure prices. Working in favor of domestic ammonia supplies is decreased phosphate production meaning more ammonia can be used in the form of nitrogen rather than phosphate production. Of course, that levers for higher phosphate prices as the U.S. is still viewed by international exporters as a premium market, and that goes for all nutrient, not just phosphate.

We advised growers book another portion of NPK this week on the second consecutive week of downside action. We saw this last year when prices dipped ahead of harvest, and then firmed slightly and spent the entire 9162015Ureawinter running sideways. This was especially true of anhydrous ammonia and since not much has changed since then on the production and import side, we expect the same to be true of this year. We have even advised to book a portion of your N needs for spring to guard against a price increase. Click here to view the ALERT.

Corn futures are steadily creeping higher, and while there has been talk of a pre-harvest low, the safe money bets that corn prices will track sideways until more data from combines is digested. Yields uncertainty may be our best friend here and a sustained rally in corn futures would give growers a chance to protect a profitable price or even sell into the cash market at a price that aligns with fertilizer prices. The gap between fertilizer prices and December 2016 futures is around $25.00 per acre this week and the more narrow that spread gets, the better it will be for the production budget and the more affordable inputs will be. Price protection will be key as corn has been extremely volatile, but remember, from volatility comes opportunity.

Make sure to follow the link above to the ALERT as some states have been advised to wait while others have been advised to go all in and still others should wait another week or two before filling 100% of needs for fall.

December 2016 corn closed at $4.09 on Friday, September 11. That places expected new-crop revenue (eNCR) per acre based on Dec '16 futures at $643.20 with the eNCR15/NH3 spread at 25.94 with NH3 at a premium to December 2016 corn futures. The spread narrowed 43.43 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $4.06 per bushel.

Nitrogen pricing by pound of N 9/16/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.40 3/4
$0.49 1/2
$0.55 1/4
$0.55 1/4
Year-ago
$0.43
$0.56 3/4
$0.59 1/2
$0.53 3/4

 

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

Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
0
40 3/4 cents
0
0
Urea
NH3 5 cents
49 1/2 cents
8 1/2 cents
3 1/2 cents
UAN28%
NH3 12 cents
55 1/4 cents
14 cents
2 cents
UAN32%
NH3 10 cents
55 1/4 cents
14 1/2 cents
4 1/2 cents

 

Anhydrous ammonia -- Anhydrous ammonia fell $12.97 on the week to a regional average of $669.14. Wisconsin led gains with a sharply lower price performance along with Missouri, Minnesota and Indiana. Iowa Illinois and Nebraska were each mildly higher.

UAN -- UAN28% solution was led higher by mild gains in Minnesota, Kansas, Iowa and Illinois although most were unchanged on 28%. UAN32% was lower overall with Minnesota and Missouri leading declines as Nebraska firmed just 2 dollars per short ton. Altogether, UAN28% is 73 cents higher regionally at $313.70 and 32% is $5.50 lower, now priced at a regional average of $352.07.

Urea -- Urea fell $2.02 to $446.59 regionally. Minnesota led urea declines along with Kansas, Indiana and Wisconsin as Indiana firmed 8 dollars per short ton.

9162015NiNDEXES