The NFiles: Let 'er Run!

Posted on 03/09/2017 10:12 AM

 

  • Anhydrous is $147.92 below year-ago pricing -- lower $12.55/st this week at $550.59.
  • Urea is $119.26 below the same time last year -- lower $7.34/st this week to $344.32.
  • UAN28% is $52.55 below year-ago -- higher $1.54/st this week to $274.75.
  • UAN32% is priced $73.74 below last year -- lower $12.15/st this week at $285.74.

NH3"Anhydrous ammonia was once again our downside leader falling $12.55. That was led by a $100 per short ton correction to the downside in Wisconsin. Kansas NH3 fell $27.92 to $441.48 and Illinois fell $10.51 per short ton. Indiana posted our only higher price this week, firming $2.59, but the "I" states are all overpriced and I expect all three to fall significantly between now and harvest. This week, Indiana NH3 is priced at $635. We generally expect Michigan to post the highest anhydrous prices compared to the rest of our survey. This week, Indiana is at a $30 premium to Michigan. That suggests NH3 price softness for the "I"states. Meanwhile, Kansas has fallen below $450 per short ton on NH3. That price may not be sustainable so we recommend growers in Kansas look for a $450 bid and book a portion to guard against potential price increases based on the already low price -- but just a portion for now, and just in Kansas.

UANUAN prices were mixed on the week with declines in 32% far outpacing gains in 28%. UAN28% was led higher by a $42.11 price hike in Missouri. The only other gainer in UAN28% was Indiana, up 85 cents per short ton. All other states were unchanged or lower on 28%. No state posts a higher 32% price. Minnesota and the Dakotas are unchanged as Ohio plummeted $80 per short ton. Wisconsin and Indiana each fell $20 as others were 7 bucks or less lower.

Urea price action was even more uniform than it was for 32%. Michigan, Nebraska and Indiana all fell roughly $16. Kansas, Wisconsin and South Dakota all softened 10 bucks with only Michigan unchanged. All other states were slightly lower on urea.

Our summer forecast for lower prices is coming to fruition, but given this week's aggressive declines, we are content to let the market run. UreaMarket watchers have been saying recently that the nitrogen supply chain is very well supplied and as domestic production bolsters inventories, dealers will be waiting out this falling knife before booking orders. That adds an element of risk, and it could be argued that if wholesalers and dealers are waiting as long as they can before pulling the trigger that declines like this week's may be a product of price discovery.

But we have seen nitrogen falling sharply since the end of the application season which reinforces the notion that the current downtrend is at least in part supply driven. At some point we will look to book a portion as part of our risk management strategy. But if nitrogen wants to keep falling, we are more than happy to hold off, possibly even booking hand-to-mouth for fall applications.

December 2017 corn closed at $3.72 on Friday, July 29. That places expected new-crop revenue (eNCR) per acre based on Dec '17 futures at $583.31 with the eNCR15/NH3 spread at -32.72 with anhydrous ammonia at a discount to expected new-crop revenue. The spread firmed 10.87 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.29 3/4 per bushel.

Nitrogen pricing by pound of N 8/26/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.34
$0.38 1/2
$0.49
$0.44 1/2
Year-ago
$0.42 3/4
$0.51 1/4
$0.58 1/2
$0.56

 

The Margins -- UAN28% is overpriced compared to anhydrous by 3 cents; UAN32% solution is 1/2 cents above NH3 on price. Urea is 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
34 cents
0
0
Urea
NH3 5 cents
38 1/2 cents
4 1/2 cents
-1/2 cent
UAN28%
NH3 12 cents
49 cents
15 cents
3 cents
UAN32%
NH3 10 cents
44 1/2 cents
10 1/2 cents
1/2 cent

 

NiNdexes

 

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