The NFiles: Nitrogen Firms as Planting Progresses

April 20, 2016 01:17 PM

 

  • NH3Anhydrous is $113.36 below year-ago pricing -- higher $2.76/st this week at $602.59.
  • Urea is $88.55 below the same time last year -- higher $1.85/st this week to $375.42.
  • UAN28% is $64.76 below year-ago -- lower 55 cents/st this week to $279.32.
  • UAN32% is priced $69.90 below last year -- higher 81 cents/st this week at $304.71.

Global nitrogen stocks may tighten near-term due to reported temporary plant shutdowns at select manufacturing facilities around the globe, but as those plants come back online, global supplies are expected to firm. Closer to home, farmers have been hard at work on field prep and USDA reported that as of Sunday April 17, corn planting progress was at 13% complete. That's 5 percentage points above the 2011-2015 average for the week and supports notions the planting season got off to an early start.

UANHere in Central Iowa farmers have been applying anhydrous ammonia although progress may slow slightly as parts of the Midwest got a shot of rain. Some areas farther south and west have had some extreme rain events, but the hardest hit areas are likely not large enough to impact domestic supplies near-term. We may see a hike in UAN demand for sidedress down the road, but for now, nitrogen prices appear to be taking seasonal demand increases in stride and while we did see a $20 pop in our regional average NH3 price a few weeks ago, upward price action since then has been fairly muted.

With nitrogen application season underway we expect to see prices continue to increase incrementally, but once spring demand is satisfied, our forecast still calls for summertime nitrogen price pressure. Northern growers should be sure to have nitrogen booked by now.

In this week's price action, anhydrous ammonia led price gains in the N segment as Iowa and Nebraska each firmed nearly $11 per short ton. Gains in UAN were led by Indiana 32% which firmed $8 per short ton. Urea was up slightly overall on mild gains in Missouri and Iowa.

UreaMinnesota posts our only downside movement this week in NH3, falling $4.12 per short ton. The statewide average price in Minnesota is about $25 above the regional average price so there may be some room to the downside, but as farmers apply NH3 in that state, incoming demand will hold prices in place and likely add mild short-term support. Get current to 100% filled on NH3 in Minnesota.

UAN declines were led by 28% in Minnesota and, here again, Minnesota growers should expect UAN in all flavors to firm as the season progresses. Declines in urea were led by a $3.95 price dip in Michigan.

At 13% planted as of the beginning of this week, we believe preplant nitrogen applications may be as much as 30% complete which suggests the demand curve still favors sellers. Get current to 100% filled on spring/summer nitrogen as prices will continue higher until demand is exhausted.

December 2016 corn closed at $3.88 on Friday, April 15. That places expected new-crop revenue (eNCR) per acre based on Dec '16 futures at $610.20 with the eNCR15/NH3 spread at -7.61 with December corn futures at a premium to NH3. The spread narrowed widened 19.10 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.50 3/4 per bushel.

Nitrogen pricing by pound of N 4/20/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.37 1/4
$0.41 1/2
$0.49 3/4
$0.46 1/4
Year-ago
$0.43 1/2
$0.51 1/4
$0.61 1/2
$0.58 1/2

 

The Margins -- UAN28% is overpriced compared to anhydrous by 1/2 cent; UAN32% solution is 1 cent below 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 1/4 cents
0
0
Urea
NH3 5 cents
41 1/2 cents
4 1/4 cents
-3/4 cent
UAN28%
NH3 12 cents
49 3/4 cents
12 1/2 cents
1/2 cent
UAN32%
NH3 10 cents
46 1/4 cents
9 cents
-1 cent

 

SpreadsN