The NFiles: Michigan Declines Pressure N Segment

Posted on 03/09/2017 10:12 AM

 

  • Anhydrous is $167.37 below year-ago pricing -- lower $13.75/st this week at $485.39.
  • Urea is $111.32 below the same time last year -- lower $2.78/st this week to $313.40.
  • UAN28% is $71.62 below year-ago -- lower 58 cents/st this week to $229.76.
  • UAN32% is priced $79.59 below last year -- lower $1.37/st this week at $257.45.

Nh3"Anhydrous ammonia was our downside leader again this week in the nitrogen segment falling $13.75 by the short ton. Michigan led declines falling $65.00 per short ton followed closely by the Dakotas. South Dakota fell $62.22 and North Dakota softened $32.77 on the week. Four states were unchanged as Kansas firmed $6.05 Nebraska added $3.61 to lead support.

UAN28% posted the meekest declines this week, softening just 58 cents per short ton. Michigan led declines here as well falling $15.46 along with a $13.02 price slide in Illinois as Wisconsin fell $11.07. Four states are unchanged and upside action was limited to a 63 cent hike in Nebraska.

UANUAN32% softened $1.37 by the short ton led by Illinois, down $9.02 and Iowa down $4.77. Seven states are unchanged as Kansas firmed 40 cents.

Urea declined $2.78 regionally. Michigan led declines here as well, falling $19.20 as North Dakota dropped $14.80. Five of the twelve states we survey were unchanged as Wisconsin firmed $5.70 and Nebraska added $1.15.

All forms of nitrogen are priced very close together this week when considered by the pound of N. Anhydrous continues to urge the segment lower. Michigan was a big part of this week's nitrogen segment price declines as that state was in need of a downward price correction. Corrections like the ones we saw in Michigan this week are just about over for the time being, and we had been waiting for Michigan in particular to fall as an indicator of waning downside potential.

UreaDemand for fall applications has the power to slow downward price paths, and as the crop comes out, and frost begins to prop up around the Midwest, we would expect nitrogen -- especially NH3 -- to find some mild support. Since prices have fallen so low against the grain of seasonal price tendencies, it is unclear how much farther nitrogen will go, and if it will continue to fall once post-harvest demand is met. For now, we maintain it is best to book fall nitrogen hand-to-mouth, and hold off on booking for spring 2017 until the market signals a clear bottom.

December 2017 corn closed at $3.39 on Friday, October 7. That places expected new-crop revenue (eNCR) per acre based on Dec '17 futures at $531.92 with the eNCR15/NH3 spread at -46.53 with anhydrous ammonia at a discount to expected new-crop revenue. The spread narrowed 48.92 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $2.92 1/2 per bushel.

Nitrogen pricing by pound of N 10/12/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.29 1/2
$0.34 3/4
$0.41
$0.40 1/4
Year-ago
$0.40 1/4
$0.47 1/2
$0.54 1/4
$0.52 3/4

 

The Margins -- UAN32% is overpriced by 3/4 cent compared to NH3. Urea holds a 1/4 cent premium to anhydrous ammonia; UAN28% solution is 1/2 cent below NH3 on price.

Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
0
29 1/2 cents
0
0
Urea
NH3 5 cents
34 3/4 cents
5 1/4 cents
1/4 cent
UAN28%
NH3 12 cents
41 cents
11 1/2 cents
-1/2 cent
UAN32%
NH3 10 cents
40 1/4 cents
10 3/4 cents
3/4 cent

 

NiNdexes

 

 

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