The NFiles: Nitrogen Segment Risk-on

March 17, 2016 11:16 AM
  • Anhydrous $154.44 below year-ago pricing -- higher 8 cents/st this week at $562.80.
  • Urea $100.44 below the same time last year -- higher 78 cents/st this week to $364.55.
  • UAN28% is $63.87 below year-ago -- lower 27 cents/st this week to $273.35.
  • UAN32% is priced $66.07 below last year -- higher 58 cents/st this week at $303.60.

UANWe are 100% filled on spring/summer nitrogen. UAN28% was our only decliner in this week's fertilizer price survey. The nitrogen segment was higher overall, but none of the products we survey firmed by more than 80 cents. anhydrous was up only 8 cents after having firmed 18 cents last week. UAN has been overpriced compared to the rest of the segment which may account for 28%'s mild softness this week.

We have heard reports of sharply higher NH3 prices across the midwest as growers book spring nitrogen. We do not expect a major price spike on any of our nitrogen products near-term, but a wet spring would increase demand for NH3.UAN. If that scenario plays out, we will want to have our UAN booked ahead of a demand push. Prices may not spike, but we believe we have booked UAN at the seasonal low.

Get current on nitrogen for spring/summer before prices firm. We expect N prices to soften once sidedress is complete but at present, we consider nitrogen "risk-on", and we expect at least mild price strength near-term.

Click here to view our advice to book anhydrous ammonia.

December 2016 corn closed at $3.86 on Friday, March 11. That places expected new-crop revenue (eNCR) per acre based on Dec '16 futures at $606.84 with the eNCR15/NH3 spread at -44.04 with NH3 at a premium to December 2016 corn futures. The spread widened 13.36 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.40 per bushel.

Nitrogen pricing by pound of N 3/17/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.34 1/4
$0.40 1/4
$0.49
$0.47 1/4
Year-ago
$0.43 3/4
$0.51 1/2
$0.59 3/4
$0.57

 

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

Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
0
34 1/4 cents
0
0
Urea
NH3 5 cents
40 1/4 cents
6 cents
1 cent
UAN28%
NH3 12 cents
49 cents
14 3/4 cents
2 3/4 cents
UAN32%
NH3 10 cents
47 1/4 cents
13 cents
3 cents

 

NiNdexes