Weekly Fertilizer Review
Urea prices move higher, with more upside possible
Published on: Jun 15, 2015
Nitrogen remains the most varied component of the fertilizer market as summer begins, with urea prices in the crosshairs for potential moves higher. Low crop prices around the world don't appear to be stifling demand much, with governments still ready to provide subsidies and financing for their growers.
Ammonia prices slipped a little lower again this week at the farmgate level, dropping almost $1 on average as dealers restocking inventory are taking advantage of lower prices this month at the Gulf. While retail prices average $670, the Gulf index for June is pegged around $408, a cost that leaves plenty of room for profit. Based on normal price relationships, retail charges should be averaging around $635, but that's toward the low end of the market on the Plains, which is running more in the $630 to $665 range. Terminal prices in those western areas dropped $20 to $560, so lower prices could be seen, though Corn Belt costs remain higher, both at the retail and wholesale level, with USDA reporting the average price in Illinois last week still at $730. Fundamentals continue to suggest lower prices but there's talk of firmer prices internationally that could limit further reductions this summer.
Urea prices moved higher on both wholesale and retail markets, with June swaps on the Gulf index up $12 by Friday to $341.50. That suggests an average retail price of nearly $490, and terminal costs upriver moved higher to catch up. Average retail prices gained more than $6 on the week to $456, with new offer sheets on the Plains typically running $465 or more, after popping $45 to $55 the past couple of weeks. Those higher charges reflect a wholesale market that gained almost $60 off April lows, buoyed by strong demand. India put out another tender on Friday that likely fed the market's move, and could keep China from lowering prices any. Traders on the swaps market appear to view this as a short-term situation however. Contracts for July are $32.50 lower, with September/October down to $292, almost $50 lower than the nearby. Still, that suggests retail prices might not get a whole lot cheaper than they already are, with $440 the projected value cost for fall.
UAN was firm last week on both wholesale and retail markets, with a few retail prices higher and lower as some late season application demand may be in play. The average cost for 28% moved slightly higher to $318, while USDA lowered its average cost in Illinois to $326.67. Wholesale costs were flat, with the Gulf index for 32% steady at $215. Swaps show little change into the end of the year, which suggests the price of 28% should be down to $290. But if other forms of nitrogen stay firm, UAN could be ready to follow suit.
Phosphates were choppy last week on the retail level. Costs for DAP seemed mostly unchanged, with 10-34-0 both higher and lower on the Plains, running $650 to $670. The average cost for DAP of $552 is $16 higher than our projection of fair retail value based on a Gulf price of $420, which was down $2 last week. Wholesale prices appear to be consolidating after a $65 move in April and May, waiting for India and Brazil to start buying again. Swaps suggest steady prices through August, with the market slightly lower into fall.
Potash prices fell again at terminal markets, with the Midwest cost down to $367.50. That translates into a fair value retail expense of $456, but average costs fell only slightly, to a little under $484. Prices in Brazil appear to be moving higher, which could limit discounts here in the U.S. this summer.
