Inputs Market Update: Wait-and-See Approach Serves Farmers Well

Posted on 03/09/2017 10:12 AM

 

Gains tallied 2 cents to Declines' $45.26 in the regional averages.

NH3"Prices continued to fall in this week's fertilizer price survey. Anhydrous ammonia led to the downside, followed closely by declines in MAP and UAN32%. Our hand-to-mouth approach to booking fall fertilizer appears to be paying off and as long as fertilizer prices maintain their downward trajectory, we favor waiting as long as possible before booking fertilizer for post-harvest applications.

When we break down this week's price action, very few states posted higher prices on any nutrient suggesting market bears are firmly in control, supporting our belief that there is more price softness on the horizon. We do know that there are deals out there that have certain fertilizers priced well below the standard whiteboard bid at select retailers, and I encourage those looking to apply fertilizer soon to get in touch with your preferred supplier to negotiate the rock bottom price.

UANPart of the pressure on fertilizer prices is surely tied to falling new-crop revenue. Part is attributable to fresh domestic production coming online as well as aggressive global production of nitrogen and potash. It is unclear how long the overall downtrend will last as we expect fertilizer prices to stabilize in response to fall demand. What is clear is that staying on the sidelines is paying off for now.

As a word of caution, the trouble with waiting to book hand-to-mouth lies in securing local supplies. Dealers may begin to have trouble figuring out how much they will need for fall applications which could lead to supply bottlenecks, supporting sharp price increases. Again I advise to keep in touch with your preferred supplier and get a feel for whether or not they have sufficient nutrient on hand, or if they are booking hand-to-mouth as well. Since domestic production is partly to thank for falling fertilizer prices, it may all boil down to transit, and prices, in the event of localized shortages will firm the most sharply at the far ends of the distribution system.

RubyFuels firmed slightly this week which comes as no surprise. In fact, with the pipeline breach south of Birmingham, Alabama, some are speculating there may be fuel shortages from that point eastward as the pipeline supplies a large chunk of the fuels consumed on the east coast -- remember the loss of the Cochin Pipeline through the northern plains and its impact on propane prices just a few years ago. That was a different scenario as the Cochin was completely taken out of the propane infrastructure. In this case, fuel price increases are likely to be short-lived, and moderate once the pipeline is repaired and functional. It is unlikely that Alabama pipeline spill will impact Midwestern fuel prices.

NCIIt is likely that harvest demand will support higher Midwestern farm diesel prices in the short-term, and if you have not yet booked diesel for harvest, get on the stick. We issued advice two weeks ago to book 100% of your harvest needs, but stay patient to book for spring as we believe there will be better opportunities closer to Christmas.

Corn Futures -- December 2017 corn futures closed Friday, September 16 at $3.76 putting expected new-crop revenue (eNCR) at $590.03 per acre -- lower $8.40 on the week. With our Nutrient Composite Index (NCI) at 590.03 this week, the eNCR/NCI spread widened 1.28 points and now stands at -63.92. This means one acre of expected new-crop revenue is priced at a 63.92 premium to our Nutrient Composite Index.

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Nutrient/Fuel
9/5/16
8/22/16
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$530.58
$527.68
-$9.69
$517.99
Anhydrous
DAP
$454.01
$453.54
-$4.77
$448.77
DAP
MAP
$466.33
$464.70
-$7.79
$456.91
MAP
Potash
$314.95
$313.93
-$4.69
$309.24
Potash
UAN28
$346.34
$249.08
-$6.26
$242.82
UAN28
UAN32
$276.03
$274.52
-$7.18
$267.34
UAN32
Urea
$330.24
$328.97
-$4.88
$324.09
Urea
Farm Diesel
$1.82
$1.85
1 cent
$1.86
Farm Diesel
LP
$1.00
$0.99
1 cent
$1.00
LP
Composite
536.96
535.79
-9.68
526.11
Composite

 

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