Inputs Market Update: A Pause or Bottoming Action?

Posted on 03/09/2017 10:12 AM

 

Gains tallied $2.88 to Declines' $2.90 in the regional averages.

NH3"Well this is interesting. Expected new-crop revenue is unchanged on the week. Our Nutrient Composite Index (NCI) is down just 0.037% on the week. That comes after our NCI fell 8.58 points last week, which was a significant decline. Across our state-by-state fertilizer and fuels price survey, 53 percent of our listed retail fertilizer prices are unchanged on the week. Above, we note the difference between gains and declines each week. For several weeks, the margin between the two has very heavily favored price declines. This week, the difference between total gains and declines is just 2 cents.

Two possibilities come to mind. The first, is that fertilizer prices are bottoming ahead of fall applications. It is a little early for that according to the seasonal tendencies we have observed over the years. We have seen fertilizer prices pop slightly in October, but in general, that price strength has been short-lived, and the downtrend has resumed after just a week or so of upside action.

PhosphateThe second possibility is that dealers are eyeing building fertilizer supplies in the United States and have decided to sit on their hands for a bit before placing large orders, and building inventory. Thoughts of planted acreage mixes must surely be starting at retail locations. Plant populations are being increased on many farms which means corn will need extra nitrogen per acre. If corn acreage exceeds this year's already high figure, nitrogen demand will boom and growers will want to pay as little as possible per acre. The same is true for retailers looking to turn a profit on fertilizer sales in a down corn market.

If we look at what drove the price moves North Dakota fell almost 13 bucks per short ton on NH3. No state posts a lower MAP price and Minnesota UAN28% fell $14.29. As I said above, the fact that so many states were unchanged on a variety of nutrients is worthy of note. But exactly what it means is a question for next week's fertilizer market action. The deceleration of the downtrend looks suspiciously like bottoming action and that may be the case, but in the current supply climate, it could just as easily be argued that the pause this week is due to a lack of interest on the part of upstream buyers.

So what are we to do here? the states who are currently priced below the regional average, and,therefore could be considered a technical "value buy" are Kansas, Missouri, Nebraska, the Dakotas, Minnesota and Wisconsin. If you believe the fertilizer market has bottomed and are purchasing NH3 in one of those states, consider booking a portion of your fall needs at today's price. If prices hook higher next week, we will advise a more aggressive approach, but if prices stay relatively unchanged or even go lower, we will continue to hold off.

It would be an excellent time to check in with your preferred retailer to ask about available supplies and where they see your local prices heading as harvest nears.

dieselDiesel is 3 cents lower this week. All states in our survey are either unchanged or lower. No state posted a higher farm diesel price this week. Crude oil is looking a little toppy and we expect the upside to be very limited for crude oil near-term. I wouldn't go so far as to say we hold a downside bias on crude oil, heating oil and farm diesel, but since prices for diesel are trending decidedly lower across the entire 12-state region, we will stand pat and make the market prove it has bottomed before we make a move for fall diesel.

Book propane if you have not already. We have been flat at 98 cents per gallon regionally for three weeks. We expected flat pricing, and that is what the market has delivered. But the flat price performance over the last three weeks certainly levers for the idea that the downside is exhausted, so get your home heating needs covered at today's price and be sure to check in with our farm Fuels in Focus report later this week for more details.

Corn Futures -- December 2017 corn futures closed Friday, August 5 at $3.72 putting expected new-crop revenue (eNCR) at $583.31 per acre -- unchanged on the week. With our Nutrient Composite Index (NCI) at $563.21 this week, the eNCR/NCI spread softened 0.21 points and now stands at -20.09. This means one acre of expected new-crop revenue is priced at a 20.09 premium to our Nutrient Composite Index.

-----------------------------------------------------------

Nutrient/Fuel
7/25/16
8/1/16
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$563.14
$550.59
-58 cents
$550.01
Anhydrous
DAP
$469.21
$466.03
-13 cents
$465.91
DAP
MAP
$482.41
$478.66
$2.50
$481.16
MAP
Potash
$338.82
$334.37
38 cents
$334.75
Potash
UAN28
$273.21
$274.75
-$1.51
$273.24
UAN28
UAN32
$297.89
$285.74
-47 cents
$285.27
UAN32
Urea
$351.66
$344.32
-18 cents
$344.14
Urea
Farm Diesel
$1.83
$1.83
-3 cents
$1.80
Farm Diesel
LP
$0.98
$0.98
Unchanged
$0.98
LP
Composite
572.01
563.43
-0.21
563.22
Composite

 

Indexes


 

 

 

 

"

Add new comment