Inputs Market Update: Book Harvest Fuels

Posted on 03/09/2017 10:12 AM

 

Gains tallied 26 cents to Declines' $30.89 in the regional averages.

NH3"Fertilizer markets continued to fall in this week's price survey but farm diesel and propane each firmed 4 cents, exhausting our appetite for risk. We advised this morning to book 100% of harvest farm diesel and propane at current prices. We expect farm diesel to soften after harvest and before the first of the year, but strength in global crude oil may limit downside potential. We advise to book harvest diesel needs and propane for grain drying and no extra. We will look to fill winter and early spring diesel needs around Christmas. You should have 100% of your propane needs booked -- that includes home heat, grain drying, confinement operations etc.

DAP was our downside leader in this week's survey falling $8.09 by the short ton. Anhydrous ammonia was not far behind, falling $7.63. No state posted a higher price on NH3 or DAP this week. MAP firmed slightly as did urea although altogether those gains added up to less than 30 cents per short ton. Potash continued to fall as burdensome world supplies weigh on the market.

LPAltogether our Nutrient Composite Index softened 5.01 to 536.96 and while we expect fertilizer to firm once demand for fall applied nutrient arrives, we will wait for the market to show us it has bottomed in a meaningful way before taking action. We have heard several reports from farmers that they have found ways to save money on fertilizer and there are certainly deals to be had if the right situation presents itself. My advice on that is to speak openly with the farmers at the coffee shop, the pub or wherever you and your cohort gather. Some have booked large quantities together to increase the retailer's willingness to discount prices and some have chosen to book for the next few years at current prices given the current state of low prices.

Urea carries the greatest amount of upside risk in our nitrogen segment as China has slowed its exports of urea by roughly 25% year-on-year, but domestic production will likely fill the gap here in the states. Unfortunately, nitrogen prices will not benefit in all states from increased production right off the bat. Those in closer proximity to fresh N production will note the benefits first. In areas farther away from fresh production entries, it may take some time to supplies to be distributed, but we expect national supplies to limit the upside for nitrogen into the spring at most Midwestern locales.

DieselOur appetite for risk on the fertilizer side remains strong, and as I said above, we will wait for the fertilizer markets to prove they have bottomed before taking action. Keep an eye on phosphate as global production features mildly favor the upside although DAP is priced in line with expected new-crop revenue based on Dec 2017 futures this week. MAP still has some work to do and is currently overpriced.

Corn Futures -- December 2017 corn futures closed Friday, September 2 at $3.69 putting expected new-crop revenue (eNCR) at $578.26 per acre -- higher $5.04 on the week. With our Nutrient Composite Index (NCI) at 578.26 this week, the eNCR/NCI spread widened 20.25 points and now stands at -41.30. This means one acre of expected new-crop revenue is priced at a 41.30 premium to our Nutrient Composite Index.

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Nutrient/Fuel
8/15/16
8/22/16
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$547.89
$538.21
-$7.63
$530.58 Anhydrous
DAP
$461.89
$462.10
-$8.09
$454.01 DAP
MAP
$470.78
$466.14
19 cents
$466.33 MAP
Potash
$327.45
$320.96
-$6.00
$314.95 Potash
UAN28
$259.07
$252.07
-$5.73
$346.34 UAN28
UAN32
$277.55
$279.39
-$3.36
$276.03 UAN32
Urea
$333.39
$330.17
7 cents
$330.24 Urea
Farm Diesel
$1.77
$1.78
4 cents
$1.82 Farm Diesel
LP
$0.96
$0.96
4 cents
$1.00 LP
Composite
547.82
541.97
-5.01
536.96 Composite

 

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