The NFiles: Nitrogen Demand & Snowfall

Posted on 03/09/2017 10:12 AM

 

  • Anhydrous is $173.75 below year-ago pricing -- higher $1.34/st this week at $471.70.
  • Urea is $91.95 below the same time last year -- higher $2.88/st this week to $316.96.
  • UAN28% is $65.12 below year-ago -- higher $2.03/st this week to $228.65.
  • UAN32% is priced $66.64 below last year -- higher 72 cents/st this week at $251.44.

InputsMonitor.com"Anhydrous ammonia was a mixed bag with three states firming, driving the regional average higher. Michigan skewed us to the upside, firming $42.93 by the short ton as Nebraska added $4.85 and Illinois gained $1.37. Three states were unchanged as South Dakota led declines falling $13.88 followed by Missouri which softened $8.19.

Urea was our upside leader in the nitrogen segment with only two states posting a lower price. Missouri urea fell $2.73 and Michigan dropped 52 cents per short ton. Three states were unchanged as Kansas, North Dakota and Minnesota all firmed just shy of ten bucks.

InputsMonitor.comUAN28% remains priced below NH3 by the pound of N but firmed slightly this week. Iowa led gains firming $11.97 followed by Minnesota, up $7.22 and North Dakota up $4.46. Four states were unchanged as Illinois led declines falling $1.16, Wisconsin softened 99 cents and Nebraska was off 24 cents per short ton.

UAN32% posted the smallest gain in our nitrogen segment this week adding just 72 cents. Seven of the twelve states we survey were unchanged as Michigan firmed 7 bucks even to lead gains followed by Kansas, up $2.18 and Nebraska gaining 18 cents. Declines were extremely mild led by a 50 cent per short ton decline in Iowa and a 26 cent cut in Illinois.

InputsMonitor.comWe proposed last week that a snowfall that stuck around would have the power to stop nitrogen's price advance IF the current advance is a demand-led rally. Winter delivered that snow and while the Dakotas, Minnesota, Wisconsin and Michigan are nearly covered in snow from border to border, Illinois and Iowa are only half covered while the rest of our twelve state survey area is still not under significant snowpack with Nebraska and Missouri showing just isolated swatches of lingering snow and Kansas clear. The southern states in our survey were among the first to complete harvest and it makes sense to suggest they were also the first states to complete fall nitrogen applications.

https://www.ncdc.noaa.gov/snow-and-ice/snow-cover/us/20161101-20161205If we are to tie nitrogen price increases to the advent of snowcover, it would follow that northern states would exhibit falling prices as they are currently mostly covered in snow, slamming shut the application window. That is not the case. North Dakota, for example, did post a softer NH3 price this week, but UAN in both flavors and urea all firmed in that state. Michigan, which is also very nearly covered in snow led gains across our entire fertilizer spectrum, firming $42.93 on anhydrous this week alone.

If we look at Iowa and Illinois, two states who share about the same amount of snowcover as of December 5, Iowa NH3 fell 60 cents per short ton as Illinois firmed $1.37. Meanwhile, Kansas, who appears to have no snowcover, is unchanged across the board this week.

It may be too early to say the fall demand window has closed entirely. The International Plant Nutrition Institute (IPNI) takes a look at nitrogen applications during periods of low soil temperatures, snow and rain, and forwards research by Richard Engel, Clain Jones and Tom Jensesn which suggests ammonia losses can be exacerbated if N applications are made into "...wet surface soil followed by several days of slow drying with little or no precipitation..." (click here to read the article from IPNI). There are some significant cautions that should be observed when dealing with a thin layer of snow that melts away before nitrogen has a chance to move into the soil profile. That may suggest we are on the right track, but since, by my rough estimation, only about half of our fertilizer price survey coverage area is currently under snow, there may still be enough demand around to have lifted prices slightly this week.

This gives me a measure of confidence to wait to see what next week holds. World and U.S. nitrogen supplies are still considered ample although cutbacks in Chinese urea production are of concern. With nitrogen in good supply and a track record of price softness into the first of the year, the seasonals suggest that price softness will be right around the corner. I would rather chase prices lower than higher, and I am still of the belief we will get a chance to do just that between now and springtime. For now, check with your preferred supplier on local supplies, and be ready to pull the trigger on nitrogen for spring when the market comes our way or signals a more determined effort toward the upside.

Just remember, we are not shopping for nitrogen in a vacuum, and corn futures are expected to remain rangebound very near where they have in the past several weeks. That gives us some breathing room and the luxury of gambling with our time for lower nitrogen prices. Since expected new-crop revenue holds a strong premium to all four of the forms of nitrogen we survey, we have some breathing room. But if corn prices decline sharply, and appear to want to eliminate that premium, we will be forced to act more quickly than we would otherwise.

December 2017 corn closed at $3.77 on Friday, December 2. That places expected new-crop revenue (eNCR) per acre based on Dec '17 futures at $596.29 with the eNCR15/NH3 spread at -124.59 with anhydrous ammonia priced at a discount to expected new-crop revenue. The spread narrowed 18.27 points on the week.

Nitrogen pricing by pound of N 12/6/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.29
$0.35
$0.40 1/2
$0.39 1/4
Year-ago
$0.39 1/2
$0.46 1/2
$0.53
$0.49 3/4

The Margins -- UAN32% is at a 1/4 cent premium to NH3. Urea is 1 cent above anhydrous ammonia; UAN28% solution is priced 1/2 cent below NH3.

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

 

InputsMonitor.com

 

Snowcover map credit: www.ncdc.noaa.gov/snow-and-ice/snow-cover/us/20161101-20161205

 

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