The NFiles: Nitrogen Dives Lower

Posted on 03/09/2017 10:12 AM

 

  • Anhydrous is $153.26 below year-ago pricing -- lower $1.53/st this week at $549.06.
  • Urea is $119.98 below the same time last year -- lower $8.81/st this week to $335.52.
  • UAN28% is $64.17 below year-ago -- lower $12.82/st this week to $261.93.
  • UAN32% is priced $84.18 below last year -- lower $7.86/st this week at $277.88.

NH3"Anhydrous posted tepid declines on the week. Four states fought to the downside with Missouri NH3 leading declines, falling $36.73, Illinois down $22.17, Iowa down $13.58 and Kansas rounding out declines with a $9.02 drop per short ton. On the other side of the coin, Minnesota firmed $25.91, Nebraska is up $19.71 on the week, South Dakota is up $12.78 and North Dakota firmed $4.69.

UAN was lower on the week with 28% leading overall declines. Missouri 28% fell $49.74 by the short ton. Minnesota fell $26.99 as Nebraska 28% softened $13.52. Kansas 28% firmed $6.28 as Iowa added $3.23. Only Ohio is unchanged on the 28% side.

UAN32% is priced below anhydrous this week on an indexed basis which tells us, pound for pound, 32% should be considered a value at current prices. It took some serious declines to get that done. Michigan 32% fell $48.00 by the short ton. South UANDakota, Illinois and Missouri each fell about 17 bucks as Minnesota and Iowa fell less than ten dollars. Only two states posted a higher price. Kansas was up $16.86 as Nebraska firmed $2.07. Meanwhile, Indiana, Wisconsin, North Dakota and Ohio are all unchanged on 32% this week.

Urea keeps drilling lower on the back of Chinese stocks. Wisconsin fell $28.30 as North Dakota and Missouri each shucked about 24 bucks. Michigan firmed $4.05 along with a $4.56 price hike in Illinois. Ohio is the only state unchanged on the week.

Perspective -- Last week we looked at fertilizer's flat price performance as a possible indication of a pre-harvest low. But this week, nitrogen is sharply lower. Anhydrous posted the smallest decline of any of the nutrients in our weekly price survey. Since Ureaanhydrous is our standard-bearer in the N segment, and urea and UAN32% are each priced just below NH3, a bottom seems plausible this week. As though the market had one last gasp to the downside before halting in preparation of firming in response to post-harvest demand.

But with corn prices trading in a very narrow, sideways range, nitrogen will have to be careful with any price increases as growers are more likely to wait out seasonal price strength, than book nutrient for fall at a potential loss.

December 2017 corn closed at $3.73 on Friday, August 12. That places expected new-crop revenue (eNCR) per acre based on Dec '17 futures at $584.99 with the eNCR15/NH3 spread at -35.93 with anhydrous ammonia at a discount to expected new-crop revenue. The spread widened 2.64 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.26 per bushel.

Nitrogen pricing by pound of N 8/17/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.34
$0.37 1/2
$0.46
$0.43 1/2
Year-ago
$0.43
$0.51 1/4
$0.57 1/2
$0.56 1/2

 

The Margins -- UAN28% is overpriced compared to anhydrous by 2 1/2 cents; UAN32% solution is 1/2 cent 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
37 1/2 cents
3 1/2 cents
-1 1/2 cent
UAN28%
NH3 12 cents
46 cents
12 cents
0
UAN32%
NH3 10 cents
43 1/2 cents
9 1/2 cents
-1/2 cent

 

NitrogenIndexes

 

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