The NFiles: Nitrogen Demand Still Supportive

May 12, 2016 01:30 PM

urea

  • Anhydrous is $116.19 below year-ago pricing -- higher 23 cents/st this week at $605.75.
  • Urea is $82.61 below the same time last year -- higher 89 cents/st this week to $377.45.
  • UAN28% is $56.43 below year-ago -- higher $2.30/st this week to $283.02.
  • UAN32% is priced $59.48 below last year -- lower 25 cents/st this week at $311.92.

Preplant applications are all but wrapped up. The only thing standing in the way is the weather and farmers have proven this year that they will act quickly to take advantage of windows in the weather to complete fieldwork. Although nitrogen price gains have been mild lately, this week's anhydrous price per ton is $43.04 above the early March low when we advised booking NH3 for spring.

UANDemand has been the number one supportive factor in the nitrogen segment and we strongly advise growers who have not yet booked anhydrous for this spring to get on the stick. What demand remains for nitrogen has the potential to urge prices higher as the seasonal rally runs out of time.

This rings the most true on UAN, and demand will surge once corn emerges, supporting UAN prices well past preplant cocktails. UAN28% is $12.10 off the March low, marking a 4.5% increase and 32% is up $9.33 since the same period to post a 3.08% increase since the price low.

Urea prices are up 4.08% from the March price low when we pulled the trigger. This week's price is $17.29 per short ton higher regionally. StatsCanada reports Canadian urea shipments are down 5.9% from year ago which leaves a bit of overhang in the supply chain and supports our forecast for softer summertime urea prices.

NH3I'll restate the obvious here... if you have not yet booked spring/summer nitrogen it is time to get on the ball and book your needs. Demand-based price discovery will punish late comers with higher prices and while we have not seen a dramatic upside move in prices since the late-winter lows, we do not believe prices will fall until end users give clear signals that the seasonal demand push is over.

December 2016 corn closed at $3.84 on Friday, May 6. That places expected new-crop revenue (eNCR) per acre based on Dec '16 futures at $603.47 with the eNCR15/NH3 spread at 2.28 with anhydrous ammonia at a slight premium to expected new-crop revenue. The spread widened 18.73 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.54 3/4 per bushel.

Nitrogen pricing by pound of N 5/12/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.37 1/2
$0.41 3/4
$0.50 1/2
$0.48 1/4
Year-ago
$0.44
$0.51
$0.61
$0.58 1/4

The Margins -- UAN28% is overpriced compared to anhydrous by 1 cent; UAN32% solution is 3/4 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/ 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 1/4 cents
10 3/4 cents
3/4 cent

 

Spreads