Weekly Fertilizer Review
Fertilizer prices calm in sea of volatile markets
Published on: Jan 20, 2015
While international markets from currencies to crude oil and other commodities continue to see extreme price movements, volatility so far has not spilled over into the fertilizer complex. Prices remained mostly steady this week, though sellers are nervous about maintaining costs at present levels. Despite the break in crop futures the cost of fertilizing an acre of corn is 12% higher than a year ago. Still, average retail markets are fairly priced, given expenses suppliers must pay on wholesale market.
Ammonia prices at the retail level eased $1 a ton last week, with the average running $685 a ton. That’s spot on with fair value considering wholesale costs and traditional mark-ups. With corn acres expected to fall in the U.S. and international demand weak, benchmark prices in at the Gulf and Black Sea could see further reductions this winter. But getting any of that cheaper supply into position for farmers may be difficult for those who wait, gambling on lower prices. The drop in U.S. corn acres has potential in theory to lower April retail costs all the way to $600 or less, according to one of our models. But there’s also risk of a $100 run up if the supply chain breaks down, after farmers slashed applications last fall.
Urea prices were steady at the retail level for farmers last week, with the average remaining at its lowest point in a year. International costs moved higher on seasonal demand at the start of winter, but fell this week on world markets. The benchmark price at the Gulf dropped $9 to $332, with upriver terminals down about half that much. With urea priced in U.S. dollars, countries using crumbling currencies like the Euro face higher costs that may hurt demand. China is also expected to export more under its new tax program, helped by lower production costs because it uses cheaper coal, not ammonia. India reportedly is stepping back into the market to buy more, which could soak up some of that supply. While swaps point to lower prices into February, the current average retail price around $465 is within $15 of fair value, given current wholesale costs and traditional mark-ups. That means retail prices may not get much cheaper this winter.
UAN still looks like the most firm segment of the nitrogen complex, with good demand so far after lower fall nitrogen applications and increased farmer interest in shifting nitrogen methods. The benchmark price at the Gulf was steady at $267.50 for 32%, though the average retail cost for 28% fell a buck to $319. Retail prices likely reflect deals done when wholesale costs were cheaper; dealers restocking now may bump offers $15 with swaps firm through March. Spring offers could run around $345, based on the current contract market.
Phosphates were unchanged on U.S. retail and wholesale markets last week, with good international demand keeping supplies in check. Costs at the Gulf rose around $50 into winter; they’re at $442.50 now, while average retail prices eased about half that much. That has the average retail price of $558 within $10 of fair value, given wholesale costs and traditional markups. Gulf swaps are firm through March, suggesting price cuts may be hard to come by unless farmers close their wallets and dealers have leftover tons to sell.
Potash prices were steady last week across the board with retail average of $485 still running $80 higher than the terminal cost. China signed a three-year deal with the Canadian exporting consortium, but is still negotiating the price of its first 2015 purchase. With those talks dragging on longer than anticipated, the rest of the market is on hold. Costs could have a little downside potential if farmers cut back applications, with maybe $10 upside risk into spring.
Download the complete report, which includes detailed charts and forecasts for ammonia, urea, UAN, phosphates and potash, using the link below.
Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Advisor. He conducts Farm Futures exclusive surveys on acreage, production and farm management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key farm crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.
Download file: WFertR012015.pdf
