Weekly Fertilizer Review
Retail fertilizer prices play catch-up
Published on: Jun 8, 2015
International fertilizer markets experienced a turbulent year so far in 2015, hit with low crop prices, politics and volatile currency exchange rates. Retail prices here in the U.S., by contrast, were calm. That's starting to change as the season for application winds down, leaving some products in surplus and others squeezed.
Ammonia prices slipped a little lower this week at the farmgate level, dropping $4 a ton to $671 on average. Though costs remain at $700 and above in key states like Iowa and Illinois, charges on the Plains continue to ease, reflecting the big drop seen earlier at the Gulf. Offer sheets on the Plains are running mostly $630 to $665, but some this week slipped below $600. Terminal prices dropped last week, especially in the west, with the range now $580 to $610. Current fair value based on the wholesale market is around $635, and fundamentals suggest prices should be lower this summer, with a projected range between $545 and $600 retail. That forecast seems too low for this market, unless product accumulates as farmers decide to forgo fall application.
Urea prices moved higher gain last week at the retail level, with the average price up $5 to $450. Though some suppliers are $40 below that, others are early $40 above, with more upside possible. Global prices were mixed last week: The Gulf dropped $8.50 to $329, but costs out of the Black Sea were higher. River terminals here in the U.S. also posted increases as they try to catch up with urea costs that moved sharply higher this spring. In fact, fair value based on those costs is around $20 or more higher than the current average. As a result, even though the swaps market shows a $50 break into late summer and fall, that reduction would bring the current retail price down only $20, to $430. As with ammonia, fundamentals imply lower prices still, all the way down to $385, but the nitrogen market seems out of whack in a world where some governments are still subsidizing nutrients for their growers.
UAN eased again last week, falling around a $1 on the retail market for 28%, taking the average down to $317. Costs still seem expensive compared to the wholesale market, which was down sharply this spring after a big run up on ideas farmers would boost alternate N sources this year to cut costs. The index at the Gulf for 32% fell another $5 last week to $215, suggesting the price of 28% should be down to $290, with late summer contracts $5 cheaper. But as with the rest of the complex, that looks like heavy lifting.
Phosphates edged lower at the Gulf last week, with no indication so far that the global rise in prices of the past month or two is set to continue. Supplies are relatively tight worldwide, but buyers aren't bidding up prices with government spending constrained and profit margins thin. Retail prices in the U.S. were steady last week at $552 for DAP, a cost that's just $12 above our projected fair value. Swaps into the fall are flat, suggesting price declines may be modest at best. Fundamentals suggest lower prices this summer but other countries don't appear to be getting those price signals from the market.
Potash prices have been dead flat at the retail level most of this year, while wholesale prices eased lower. Though the Midwest terminal price rose $2.50 last week to $372.50, suppliers apparently are ready to hold their prices steady into the fall. The current average retail price of $484 should be around $20 lower according to wholesale costs, but any big declines are looking less likely unless one of the big companies decides to go after market share by dropping prices.
