The NFiles: Downside Momentum Builds

Posted on 03/09/2017 10:12 AM

anhydrous"

  • Anhydrous is $143.90 below year-ago pricing -- lower $9.68/st this week at $538.21.
  • Urea is $118.44 below the same time last year -- lower $3.22/st this week to $330.17.
  • UAN28% is $61.66 below year-ago -- lower $7.00/st this week to $252.07.
  • UAN32% is priced $84.14 below last year -- higher $1.85/st this week at $279.39.

Anhydrous ammonia led the entire fertilizer segment lower posting a $9.68 per short ton decline. Only Iowa NH3 prices firmed, but that was only by 30 cents. South Dakota and Michigan were each unchanged. Nebraska led the regional average anhydrous price lower, falling $34.23. Wisconsin and Minnesota each fell $25 as Illinois and Kansas were each down about 9 bucks.

UANUAN28% fell $7.00 even led by declines in Nebraska, down $22.17, Illinois, down $19.64 and North Dakota off $13.50. UAN32% featured a more mixed tone than did 28% with gains outpacing declines by $1.85. Nebraska and Kansas each fell about 9 bucks along with very mild declines in Iowa and Minnesota. The Dakotas, Ohio and Michigan were all unchanged.

Urea fell $3.22 by the short ton, led by North Dakota declines to the tune of $15.70 and Minnesota fell $13.30. Beyond a $11.70 decline in Missouri, other declines were mild. Price increases were equally mild with Iowa, Wisconsin and Ohio up just a few bucks. Only Michigan is unchanged on urea.

ureaPerspective -- As long as nitrogen wants to continue lower, we will not stand in the way. Gains in anhydrous were limited to just a 30 cent bump in Iowa which is a sign of strong downward momentum. Given that, we believe nitrogen will continue to fall at least for a short time. Farmer demand for fall nitrogen may put a temporary floor under anhydrous, and it is possible UAN and urea will pause at the same time. Our forecast for lower nitrogen prices by the first of the year remains, but we will watch carefully for signs of a potential reversal.

December 2017 corn closed at $3.66 on Friday, August 26. That places expected new-crop revenue (eNCR) per acre based on Dec '17 futures at $573.22 with the eNCR15/NH3 spread at -35.01 with anhydrous ammonia at a discount to expected new-crop revenue. The spread narrowed 17.22 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.18 1/2 per bushel.

Nitrogen pricing by pound of N 8/31/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.32 3/4
$0.37
$0.45 1/4
$0.43 1/2
Year-ago
$0.42 1/4
$0.49 3/4
$0.56 1/2
$0.57

 

The Margins -- UAN28% is at parity with anhydrous ammonia; UAN32% solution is 1/2 cent below NH3 on price. Urea is 1 1/2 cent below anhydrous by the pound of N this week.

Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
0
32 3/4 cents
0
0
Urea
NH3 5 cents
37 cents
4 1/4 cents
-3/4 cent
UAN28%
NH3 12 cents
45 1/4 cents
12 1/2 cents
1/2 cent
UAN32%
NH3 10 cents
43 1/2 cents
10 3/4 cents
3/4 cent

 

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