Inputs Market Update: Tide May be Turning In Commodities... and Fertilizer

Posted on 03/09/2017 10:12 AM

Gains tallied $1.34 to Declines' $7.32 in the regional averages.

The tide in grains gave signs of turning in last week's trade. Crude firmed slightly last week along with mild gains in parts of the overall commodity sector. As we start this new week, crude is lower again along with the dollar and so are grains. We have been watching March corn for strength above $3.70 and we can point to today's March corn close at $3.71 1/4 as evidence that at least corn may have placed a near-term low. We had expected WTI crude oil to retest levels below $30 per barrel and the March WTI contract did just that on Monday and Tuesday last week, but we have failed to close below $30 suggesting 2-handle crude may be a thing of the past.

NCI"This week, fertilizer prices were mixed and our Nutrient Composite Index was slightly higher. If the rest of the commodity segment has turned a corner, and reliable support has been placed on the charts, it may mean that fertilizer has also turned the corner and may begin to recover some of what has been lost in the recent fertilizer price slide. Anhydrous was lower on the week but our entire P&K segment is up this week and so is urea. Our margin analysis in this week's TheNFiles will help us get a handle on how nitrogen prices stack up, but all of the nitrogen prices in our survey are below expected new-crop revenue. For those looking for fertilizer prices to reflect corn prices, there's your sign. I do not believe nitrogen prices will stay below new-crop revenue for long, but I do not expect a sharp recovery overnight in fertilizer either.

This week's upside action in P&K was very mild with DAP firming just 9 cents per short ton. MAP is up 83 cents and potash is 94 cents higher this week. Reports of cuts in export taxes on phosphate feedstocks leaving China may yet equate to lower phosphate prices in the U.S. by spring, but we have been targeting late January to early February for our NH3seasonal fertilizer price low. If the rest of the commodity world wants to firm, it stands to reason that fertilizer will follow. This week may mark the first time we have seen evidence of a turnaround, but we will continue to wait for confirmation of a low. If fertilizer prices continue higher next week, we will advise you catch up to 50% covered for spring applications and we may even extend coverage to the 80% filled area if the market snaps back in a big way.

We have been watching all of the fertilizers we survey sink to long time lows. Eventually the downside will exhaust itself, but there are still a number of forecasts and wholesale watchers expecting even lower fertilizer prices before spring. We will leave room in our prebooked fertilizer load for that, but if prices start higher we will look to take advantage of fertilizer's currently very low price.

Fuels were mixed as well this week with farm diesel down 3 cents and propane unchanged. Firmer heating oil futures have equated to higher farm diesel prices in the past, but March heating oil futures are down a nickel on the day today, giving us some room to breathe. Here again, the low may be in place at this week's price, but the market has yet to confirm that the downside run is over for diesel. Stay hand-to-mouth unless you can book diesel for $1.10 or less. In that case, fill your spring needs at that price.

dieselWhether you book at the ultimate price low or not, fertilizer and fuels pricing are at levels that will fit into just about any growers budget. The most important thing, obvious as it sounds, is to make sure fertilizer and fuel purchases fit into your production budget on a per acre basis.

Corn Futures -- December 2016 corn futures closed Friday, January 22 at $3.93 putting expected new-crop revenue (eNCR) at $618.60 per acre -- higher $1.69/acre on the week. With anhydrous priced at $586.60 this week, the eNCR/NH3 spread widened 6.58 points and now stands at -32.00. This means one acre of expected new-crop corn revenue is priced at a $32.00 premium to one ton of anhydrous ammonia.

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Nutrient/Fuel
1/19/16
1/25/16
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$587.69
$591.70
-$5.11
$586.60
Anhydrous
DAP
$499.45
$499.49
9 cents
$499.58
DAP
MAP
$520.55
$515.91
83 cents
$516.74
MAP
Potash
$380.67
$381.21
94 cents
$382.15
Potash
UAN28
$277.38
$276.74
-46 cents
$276.28
UAN28
UAN32
$312.93
$312.05
-$1.72
$310.33
UAN32
Urea
$378.65
$373.01
0.31
$373.32
Urea
Farm Diesel
$1.60
$1.59
-3 cents
$1.56
Farm Diesel
LP
$1.01
$1.02
Unchanged
$1.02
LP
Composite
604.57
602.73
0.25
602.98
Composite

 

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