The NFiles: UAN28% Rejects Life Below Potash

January 24, 2017 12:48 PM

 

  • Anhydrous is $116.36 below year-ago pricing -- higher $3.98/st this week at $475.34.
  • Urea is $96.73 below the same time last year -- higher $6.03/st this week to $345.24.
  • UAN28% is $47.44 below year-ago -- higher $8.99/st this week to $229.30.
  • UAN32% is priced $49.00 below last year -- higher $10.13/st this week at $263.93.

inputsmonitor.comUAN32% led gains in the nitrogen segment firming $10.13 regionally by the short ton. 32% was led higher by Ohio which firmed $80.00 as Illinois added $11.40 and Kansas gained $10.42. Four states were unchanged as Indiana was the only state to post a softer price... down 38 cents.

UAN28% was not far behind, firming $8.99 per short ton. Wisconsin led gains here firming $48.00 by the short ton as Michigan added $19.73 and Nebraska firmed $12.88. No state was unchanged as Minnesota softened $4.03, North Dakota fell $2.06 and South Dakota rounded out declines, dipping $1.68.

inputsmonitor.comUrea gained another $6.03 led by Kansas, up $9.78, Iowa firmed $8.88 and Wisconsin and Illinois both gained $7.68 per short ton. No state was unchanged and, for the second consecutive week, no state posted a lower urea price, which is a very bullish setup.

Anhydrous ammonia firmed this week as well, led by Wisconsin which added $20.00, Kansas firmed $14.03 and Nebraska gained $10.90. Two states were unchanged as declines were limited to a $3.05 cut in Minnesota and a 94 cent per short ton decline in Iowa.

If we look at UAN solutions as a barometer of the inputsmonitor.comnitrogen segment, this week's support for both 28 and 32 percent suggest support for the segment at large. Since UAN is an amalgam of ammonia and urea, upside action in UAN implies upside risk for NH3. We have already seen urea firm steadily and had speculated about urea's ability to urge the rest of the nitrogen segment higher. With UAN's aggressive price strength this week, urea's influence appears to have been confirmed.

That adds urgency to the advice we issued ahead of the first of the year to get some nitrogen covered for spring. Urea extended its premium to the rest of the N segment this week which does not bode well for near-term price action.

It is also interesting to note that last week potash firmed above UAN28% on an indexed basis. For the first time since mid-August inputsmonitor.com2015, potash ceded its position as our lowest priced nutrient to UAN28%. What is even more interesting is that the last time potash held a premium to another nutrient, it was UAN28%. That price relationship came just as all fertilizers began the downtrend we now appear to be exiting. The pattern, from a technical perspective, may indicate another change of direction. Perhaps we are making too much of this, but sharply higher urea, UAN28%'s rejection of an indexed value below that of potash and the spread between the year-ago prices all lever for upside risk.

We have also been watching UAN32%'s relationship with the rest of the N segment as another indicator that N is coiling to firm. This week, UAN32% led overall gains across our entire survey, and only one state posted a lower UAN32% price... Indiana down a meager 38 cents per short ton. .

Nitrogen in all flavors is still priced well below expected new-crop corn revenue and still presents a very good value. But if urea can firm as far and fast as it has, and UAN solutions follow in agreement -- which it has, that discount to new-crop revenue could easily dissolve in a hurry.

December 2017 corn closed at $3.95 on Friday, January 20. That places expected new-crop revenue (eNCR) per acre based on Dec '17 futures at $632.70 with the eNCR17/NH3 spread at -157.36 with anhydrous ammonia priced at a discount to expected new-crop revenue. The spread widened 11.41 points on the week.

Nitrogen pricing by pound of N 1/24/17

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.29 1/4
$0.38 1/2
$0.40 3/4
$0.41 1/4
Year-ago
$0.36 1/4
$0.49
$0.49 1/4
$0.48 1/2

 

The Margins -- UAN32% is at a 2 cent premium to NH3. Urea is 4 1/4 cents above anhydrous ammonia; UAN28% solution is priced 1/2 cent below NH3.

Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
0
29 1/4 cents
0
0
Urea
NH3 5 cents
38 1/2 cents
9 1/4 cents
4 1/4 cents
UAN28%
NH3 12 cents
40 3/4 cents
11 1/2 cents
-1/2 cent
UAN32%
NH3 10 cents
41 1/4 cents
12 cents
2 cents

 

inputsmonitor.com