The NFiles: Nitrogen Lower Amid Corn Market Volatility

Posted on 03/09/2017 10:12 AM

 

  • Anhydrous is $132.56 below year-ago pricing -- lower $5.79/st this week at $577.22.
  • Urea is $97.84 below the same time last year -- lower $4.89/st this week to $365.57.
  • UAN28% is $61.09 below year-ago -- lower $1.27/st this week to $277.73.
  • UAN32% is priced $68.67 below last year -- lower $4.00/st this week at $295.14.

NH3"Anhydrous ammonia led our nitrogen complex to the downside this week, falling $5.79 per short ton. Michigan was a big influence on prices almost across the board this week, posting huge price declines. Michigan NH3 is down $39.14 on the week but is still priced above our regional average. Michigan is typically at the top end of our fertilizer price survey, and is among the last states to see prices fall at the close of spring and fall demand periods. With Michigan prices falling, preplant demand and most of sidedress demand has likely dried up.

Declines were not limited to Michigan, however. Kansas fell $1456 and Minnesota and the Dakotas each fell roughly twelve bucks on the week. In fact, no state posts a higher NH3 price this week.

UANUAN solutions favored a more mixed tone, likely related to demand for sideressed liquid N. Michigan 32% was a downside leader as well, falling $47.20 on the week to a level well below the regional average. South Dakota 32% firmed $32.90, but we expect that and other upside swings like it to quickly retrace lower.

Urea was driven lower by a $17.70 price decline in Michigan with gains and declines across our 12-state survey averaging out to a lower price overall. North Dakota urea firmed $10.90 as South Dakota firmed 89 cents. Four of the states in our survey are unchanged on the week.

We expect nitrogen prices to exhibit far less volatility that corn futures, and we look more closely at the impacts of increased corn market volatility on nitrogen prices through summer in an article we titled "If You Don't Like the Weather Market, Wait Ten Minutes." Click here to read more.

Urea3yrSince nitrogen demand is winding down for the season and domestic production is ramping up, we maintain our outlook which calls for sideways nitrogen price action through summer with a downside bias. Fall prices will firm slightly in response to seasonal demand and then continue lower through the winter months.

December 2016 corn closed at $4.48 on Friday, June 17. That places expected new-crop revenue (eNCR) per acre based on Dec '16 futures at $711.06 with the eNCR15/NH3 spread at -133.84 with anhydrous ammonia at a discount to expected new-crop revenue. The spread softened 36.05 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.46 per bushel.

Nitrogen pricing by pound of N 6/23/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.35 1/4
$0.40 1/2
$0.49 1/2
$0.46
Year-ago
$0.43
$0.51 1/4
$0.60
$0.56 1/2

 

The Margins -- UAN28% is overpriced compared to anhydrous by 2 1/4 cents; UAN32% solution is 3/4 cent above NH3 on price. Urea is at a 1/4 cent premium to 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
35 1/4 cents
0
0
Urea
NH3 5 cents
40 1/2 cents
5 1/4 cents
1/4 cent
UAN28%
NH3 12 cents
49 1/2 cents
14 1/4 cents
2 1/4 cents
UAN32%
NH3 10 cents
46 cents
10 3/4 cents
3/4 cent

 

NsPreads

 

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