Inputs Market Update: New-crop Revenue Holds-on to Premium to Fertilizer

Posted on 03/09/2017 10:12 AM

Gains tallied 1.29 to Declines' $11.51 in the regional averages.

NCI"Potash was our downside leader in this week's fertilizer price survey. Exporters from Belaruskali report they have reached a deal with Indian potash importers. When we say that Chinese potash contracts set the benchmark price for exports, India is always a close second. Since Chinese importers are flush with potash and receiving regular shipments from Russia, India has stepped in and signed a 700,000 tonne deal with Belaruskali at the bargain basement price of $227 per tonne. That is a 31% discount from contracts signed last year. Since potash prices dove so low under the benchmark price of $332 per tonne last year, this year's price should keep the pressure on global potash prices.

The deal is good for 700,000 tonnes within a 180 day time period so we may see pre-harvest potash prices firm if another contract is signed at that time or between now and then, but for the moment, the deal between India and Belarus is price-negative for global potash.

UANUAN solutions were our only upward movers, both firming on strength in Indiana and about half of the states in our survey unchanged. Sidedress in the Eastern Belt is likely to blame for the higher prices, and that suggests prices will fall in Indiana once demand trails off. Anhydrous and urea were both lower on the week as were DAP, MAP and potash.

Farm diesel firmed slightly as crude oil is beginning to establish a range at a higher price. The higher dollar and Britain's vote to exit the European Union are currently weighing on WTI and Brent crude futures. Many market watchers believe the market responses to Brexit will be short-lived and easily recovered, once the headlines cool off. If other EU members decide to follow suit and exit the Union, markets will continue to struggle. EIA reported last week that distillate supplies are building gradually, limiting price support for diesel. August WTI crude futures dipped as low dieselas $45.83 early in today's trade but has since rebounded to nearly $47 per barrel.

We will wait for distillate supplies to increase and weigh on prices before pulling the trigger on farm diesel for harvest. We are also watching the EU for cues that other nations will exit the Union and keep the pressure on crude oil markets.

Fertilizer proved its relative "inexpensiveness" compared to corn futures and expected new-crop revenue as December 2016 futures fell off a cliff late last week, and ended today's (Monday June 27) session unchanged at $3.94 1/4. Still, expected new-crop revenue is at a $35.83 premium to an acre of new-corn revenue. We expect that condition to continue well into the summer, and, according to December 2017 futures, beyond winter 2016-17. In general, we expect fertilizer prices to remain favorable for the NH3sPreadsbuyer, and for farm diesel to ultimately firm between now and harvest and to continue mildly higher through winter. We have time to get into that, and will in a later post. For now, book farm diesel needs hand-to-mouth until a decent opportunity presents itself.

Corn Futures -- December 2016 corn futures closed Friday, June 24 at $3.94 putting expected new-crop revenue (eNCR) at $620.28 per acre -- lower $90.78/acre on the week. With our Nutrient Composite Index (NCI) at $584.45 this week, the eNCR/NCI spread firmed 88.86 points and now stands at -35.83. This means one acre of expected new-crop revenue is priced at a 35.83 premium to our Nutrient Composite Index.

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Nutrient/Fuel
6/13/16
6/20/16
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$583.01
$576.31
-$2.11
$574.20
Anhydrous
DAP
$480.18
$480.02
-45 cents
$479.56
DAP
MAP
$500.57
$498.10
-59 cents
$497.51
MAP
Potash
$350.32
$350.68
-$5.00
$345.68
Potash
UAN28
$279.00
$277.68
26 cents
$277.94
UAN28
UAN32
$299.13
$298.60
$1.03
$299.63
UAN32
Urea
$370.55
$366.07
-$3.34
$362.73
Urea
Farm Diesel
$1.86
$1.85
2 cents
$1.87
Farm Diesel
LP
$1.00
$0.99
Unchanged
$0.99
LP
Composite
589.31
586.37
-1.92
584.45
Composite

 

Spreads

 


 

 

 

 

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