Weekly Fertilizer Review
Wholesale nitrogen costs show increasing volatility
Published on: May 18, 2015
While U.S. farm-level fertilizer markets remain fairly quiet despite heavy rains raising questions about planting delays and nitrogen losses, international markets continue to show surprising volatility. Low crop prices haven't discouraged demand for some products, though others appear more affected.
Ammonia prices remained fairly quiet this spring at the farmgate, but larger moves are still showing up on international markets. Prices out of the Black Sea dropped around $13.50 this week, following a similar drop at the Gulf at the start of May. The expense of Black Sea product is more than $200 below last fall's peak, taking the cost of imports below the current $422 Gulf swaps prices. Those costs translate into a retail charge of around $645 to $685, suggesting average prices of $677 aren't far from fairly valued. Unfortunately, that means retail prices may not see much of a pullback this summer for growers interested in securing supplies for fall application. Fundamentals, including lower corn prices and acreage, suggest costs should be down to the $575 to $585 level in July. But such a move doesn't seem likely unless the market really craters.
Urea prices continue to head in the opposite direction from ammonia, with price hikes showing up at both the wholesale and retail level. Supplies remain tight and demand internationally is good, with Chinese manufacturers unwilling to cut prices to increase volumes. India still needs to buy more, but is unwilling so far on its end to ante up. Swaps at the Gulf were up $14 to 337, putting them up $72.50 since the start of April. Forwards continue to point to lower prices, with June at $324.50 and August down to $295. The high cost on the spot markets equates to a retail price all the way to $480, but actual costs are cheaper, reflecting expenses earlier. Updated offer sheets on the Plains are running around $450, while the average increased around $1 to $441.50 this week. Fundamentals project to costs around $400 this summer, but the international market will have to cool off more than indicated for that to happen.
UAN was mixed this week. Average retail costs edged slightly lower but remain around $318 for 28%, while the cost of 32% in the Gulf swaps market was at $228. The wholesale cost translates into a retail price of around $300, with summer swaps suggesting prices could break to $285 if demand stays soft. Summer swaps appear to be firming, suggesting the market's pullback this spring could be over after a correction of almost $50.
Phosphates are starting to show signs of a seasonal bottom on wholesale markets, though costs likely are attractive enough to entice much buying by farmers. DAP typically weakens twice a year at the Gulf, after buying is complete in the spring and the fall. While retail costs were steady last week at $551 on average, swaps at the Gulf were up $11.50 to $421, with another $10 added on to August/September offers. DAP has been fairly steady internationally this year, with product still subsidized in India and demand good elsewhere. Fundamentals suggest prices should be $75 lower this summer, but that may only happen if buyers around the world balk.
Potash prices eased a little this week, as the market continues its slow drift lower. Most price adjustments this year have been small, however, a few dollars at a time. Average retail prices remain around $485, though the Midwest terminal prices was $7.50 lower at $375. Wholesale costs suggest fair value around $470 to $485, with fundamentals projecting prices this summer down to $445 if the market stays soft.
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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 Adviser. He conducts Farm Futures exclusive surveys on acreage, production and 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 crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.
