The NFiles: Nitrogen Keeps Falling

Posted on 03/09/2017 10:12 AM

anhydrous"

  • Anhydrous is $117.88 below year-ago pricing -- lower $2.89/st this week at $602.71.
  • Urea is $88.27 below the same time last year -- lower $2.93/st this week to $375.26.
  • UAN28% is $58.91 below year-ago -- lower $2.14/st this week to $280.44.
  • UAN32% is priced $60.51 below last year -- lower $2.56/st this week at $307.20.

Nitrogen was our downside leader on the week with all four of the nitrogen products we survey down a couple bucks. We expect nitrogen to continue lower with urea and UAN leading the way and anhydrous falling less willingly. Supplies from overseas, falling downstream deferred prices and domestic production are all placing downward pressure on U.S. nitrogen markets.

UANWe have noted that since bottoming in February, with the exception of just a few weeks ahead of spring, N price movement has been muted. We had been expecting price increases to sharpen as corn planting season neared its end, but what we have recorded is very mild upside action which could very easily be mistaken for choppy sideways action.

That bodes well for UAN prices through sidedress as we have expected post emerge applications to add support to liquid N and perhaps anhydrous although UAN is much more popular for sidedress than is NH3.

Urea will continue to be under pressure from aggressive Chinese selling and emerging domestic production.

All in all, our current expectation is for summer prices to soften and for Ureafall prices to come in below toady's... but not by much. Spring prices will likely be above fall prices so we will consider socking some away ahead of harvest for spring 2017 to guard against upside potential or any market surprises.

December 2016 corn closed at $4.13 on Friday, May 27. That places expected new-crop revenue (eNCR) per acre based on Dec '16 futures at $652.22 with the eNCR15/NH3 spread at -49.51 with anhydrous ammonia at a discount to expected new-crop revenue. The spread softened 26.42 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.51 3/4 per bushel.

Nitrogen pricing by pound of N 6/2/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.37 1/4
$0.41 1/2
$0.50
$0.47 3/4
Year-ago
$0.44
$0.51 1/4
$0.61
$0.57 1/2

 

The Margins -- UAN28% is overpriced compared to anhydrous by 3/4 cent; UAN32% solution is 1/2 cent above NH3 on price. Urea is 3/4 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
37 1/4 cents
0
0
Urea
NH3 5 cents
41 1/2 cents
4 1/4 cents
-3/4 cent
UAN28%
NH3 12 cents
50 cents
12 3/4 cents
3/4 cent
UAN32%
NH3 10 cents
47 3/4 cents
10 1/2 cents
1/2 cent

 

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