The NFiles: Outlook Pointed Lower

January 21, 2016 11:26 AM


  • Anhydrous $126.89 below year-ago pricing -- lower $4.10/st this week at $587.69.
  • Urea $88.72 below the same time last year -- lower $3.34/st this week to $378.65.
  • UAN28% is $57.88 below year-ago -- lower $1.62/st this week to $277.38.
  • UAN32% is priced $49.73 below last year -- higher 1 cent/st this week at $312.93.

AnhydrousThe really big news this week is the flip in the expected new-crop revenue/anhydrous ammonia spread. With only mild late-week strength in the corn market last week, expected new-crop revenue is now at a premium to one ton of anhydrous ammonia. Based on our nitrogen product margin analysis, we have been expecting nitrogen prices to more closely reflect corn prices. Those margins have widened slightly over the past few weeks, and this week, UAN28% and urea have joined NH3 below the average return on one acre of new-crop revenue.

Anhydrous may have overdone it to the downside, but nitrogen prices are expected to continue to fall. NH3 prices in the Midwest will continue to edge lower and some sources now believe anhydrous prices will fall into spring application season. Wholesale ammonia prices have fallen 35.7% since the same time last year, weighing on retail anhydrous prices.

UreaUrea prices are forecast to fall due to weakness in the Chinese Yuan, weak demand in Brazil and increased supplies from Iranian producers. That has led to opportunities to urea importing nations which now have multiple sources and can search out the best deals. The global urea oversupply will continue and may force prices lower by spring.

UAN prices are also forecast lower as offers at the Gulf soften. That will also keep UAN solutions under pressure near-term since the outlook is based on sinking ammonia and urea feedstock prices.

The biggest issue for spring prices will come down to availability. If orders from wholesalers encounter difficulty in transport, a spring run on nitrogen could inflate prices where deliveries come in late. That does not mean, however, that we will book nitrogen at current prices. There is still a UANlot of winter left and offseason prices are currently pointed solidly lower across the board. We do still advise you get in touch with your preferred supplier and discuss your expected needs for spring and available supplies. That will help your dealer stay on top of inventory needs and help ensure that when you are ready to turn wheels, your nitrogen is also set to go.

December 2016 corn closed at $3.85 on Friday, January 15. That places expected new-crop revenue (eNCR) per acre based on Dec '16 futures at $605.16 with the eNCR15/NH3 spread at -17.47 with NH3 at a premium to December 2016 corn futures. The spread widened 51.18 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.55 3/4 per bushel.

Nitrogen pricing by pound of N 1/21/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.35 3/4
$0.41 3/4
$0.48 3/4
$0.48 1/4
$0.43 1/2
$0.51 3/4
$0.59 1/2
$0.56 1/2


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 1 cent; UAN32% solution is 2 1/2 cents above NH3 on price.

Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
35 3/4 cents
NH3 5 cents
41 3/4 cents
6 cents
1 cent
NH3 12 cents
48 3/4 cents
13 cents
1 cent
NH3 10 cents
48 1/4 cents
12 1/2 cents
2 1/2 cents