Weekly Fertilizer Review
Ammonia markets gets mixed signals
Published on: May 26, 2015
Farmers may be wrapping up corn planting in the U.S., but prices of many fertilizer products remain firm. International demand still appears good despite weak crop prices and suppliers are avoiding discounts.
Ammonia prices were mixed last week, reflecting the state of corn planting regionally. The latest survey in Iowa by USDA showed prices jumping $23 a ton to an average of $740.50 after a fast spring season. That's almost $100 higher than the low end of the price range on the southwest Plains, where heavy rains likely mean corn planting is over in many areas. Terminal prices in the eastern Midwest were steady at $620 while the cost to the west dropped below $600, reflecting weak international prices. Despite the usual supply chain issues around the world, the Gulf index used to settle swaps for June is $13.60 lower, around $408. Based on that cost, retail prices should be running around $640 or less – the average, however is still around $678 due to the wide range around the country. Weak fundamentals suggest ammonia could fall to $560 to $640 retail this summer, though the low end of that range may be out of reach in most area.
Urea prices continue to edge higher on both retail and wholesale markets, though farmgate costs this spring haven't risen nearly as much as international indexes. Average retail prices were up less than $1 to $443, with new offers around $8 to $12 higher last week. The index for settling swaps at the Gulf rose just $1 last week to $338, but that's nearly $75 higher than it traded just six weeks ago. As a result, dealers restocking now likely must raise prices sharply while others raise prices on remaining inventory. Their window, however, may be short, with contracts for June settlement around $20 lower and November back to $276. That fall cost is in line with fundamentals that suggest retail prices at $400 or lower.
UAN was the quiet end of the nitrogen complex last week. Retail prices for 28% were steady around $320, while the index for 32% at the Gulf slipped 50 cents to $227.50. Swaps are trading around $12.50 cheaper for summer, which suggests fair value around $288 for 28% if the retail market corrects in similar fashion to the way the wholesale market has traded this spring.
Phosphates were firm after the latest industry data showed inventories up only slight last month in the U.S. due to steady demand and production. That was 17% more than the previous year but still tight enough to keep costs at the Gulf rising. The swaps index for DAP was up $11 to $422.50, though forward contracts are mostly steady through the summer around that price. Retail prices remain flat at $551, after trading in a narrow range from late winter through spring. Current wholesale costs suggest the market is fairly valued. Fundamentals continue to point to lower prices, but unless big buyers like India balk the market may not cheapen much into summer.
Potash prices eased a little this week, following wholesale costs lower. The average price of $485 hasn't changed much since harvest, though Midwest terminal prices of $370 are $35 off winter highs and fair value is down to around $460. Fundamentals suggest even lower prices, down to around $445, which could happen if international suppliers cut prices more. Inventories last month were up sharply from levels seen last fall, though they're still below year ago levels.
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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.
