Weekly Fertilizer Review
Nitrogen prices make seasonal move lower
Published on: Jul 17, 2015
It's taken longer than usual, but nitrogen prices are finally moving lower, with both retail and wholesale costs down this week for many products. While this is the first good buying opportunity of the summer, it's still unclear how much strength the market will have headed into the fall application season, due to uncertainty over both crop prices and international demand. Fertilizer buying out of both Brazil and Argentina was slow this year, with weak currencies hurting purchasing power.
Ammonia prices at dealers on the Plains posting new offers were down sharply this week, reflecting the break in expenses seen over the spring at the Gulf. Charges in the $590s are the rule, with some even lower. Costs in the central Corn Belt remain higher, even as there's more and more talk of less fall-applied nitrogen. Still, the lower costs in the west lowered the average price to $654, down $7.50 this week alone. The current Gulf price of $417 puts terminals at $535 to $555, suggesting fair value at the retail level is around $608 to $6
Urea prices nosed dived this week, with costs down some $37 at the Gulf alone as the international market continues to falter on slow demand and adequate supplies. While an Indian tender could boost buying a little, plenty of offers are expected. Upriver terminal charges continue to drop to match the decline at the Gulf, where the current cost of $284 translates into a fair value retail of $431. Swaps into fall are $5 to $10 cheaper, matching our models current projection based on supply and demand. Some Plains dealers are already there, posting a price of $420, though the average is $455 this week.
UAN finally appears to be ready to break at the retail level, after a steep drop on the wholesale market over the spring and early summer. While the average retail charge was down only $5 this week to $312.50 for 28%, some dealers on the Plains have slashed their price down to the $280 level where we've put fair value after the wholesale price decline. The cost of 32% at the Gulf is down to $210, with the swaps market steady into the fall.
Phosphates continue to show a firm tone, with wholesale costs moving higher again this week. The cost of DAP at the Gulf was up $4 this week to $431.50, which translates into a current retail fair value of around $545. That is actually $5 less than the current price, which was unchanged at just over $550. Retail costs have barely budged all this year, while wholesale costs are edging back towards winter highs after a break in the spring. Swaps into late fall are about $20 lower, suggesting patience may be needed unless the product will be applied earlier.
Potash prices showed some variability at the retail level this week. Some dealers cut costs to reflect the $50-dollar drop at terminal markets since winter, taking their prices all the way down to the $445 level. But USDA said the cost in Iowa was actually up $15, moving back to $489.25. Our model puts fair value based on wholesale prices at $450, with fundamentals of supply and demand pegging the cost down to $434.
