The NFiles: Nitrogen Seeks Direction

Posted on 03/09/2017 10:12 AM

 

  • Anhydrous is $151.18 below year-ago pricing -- lower $1.18/st this week at $474.35.
  • Urea is $70.53 below the same time last year -- higher $2.42/st this week to $324.15.
  • UAN28% is $63.61 below year-ago -- lower 11 cents/st this week to $231.56.
  • UAN32% is priced $67.79 below last year -- lower 12 cents/st this week at $248.42.

inputsmonitor.com"Anhydrous ammonia led declines in the nitrogen segment this week, falling $1.18 regionally. Only Nebraska posted a higher price, up by 12 cents per short ton on the week. Five states were unchanged as Indiana fell $4.37, Illinois softened $3.69 and Kansas fell $2.32.

UAN solutions followed NH3 lower with 28% and 32% each down a little more than a dime per short ton regionally. UAN28% was led lower by Minnesota which fell $8.32 as Ohio softened $5.57. South Dakota led gains firming $7.09 along with Michigan which added $6.28. UAN32% was led lower by Kansas which fell $1.43 followed by Iowa which shed 25 cents. Only Minnesota posted a higher 32% price this week... up 27 cents per short ton as nine states were unchanged.

inputsmonitor.comUrea was supported by upside action in nine of the twelve states we survey. Ohio added $14.04, Illinois firmed $5.35 as Michigan gained $4.21. Iowa and Wisconsin were unchanged as only Missouri posted a softer price, falling $3.11 per short ton.

Once again urea demonstrated its aspirations for higher prices, NH3 retreated and UAN32% was paralyzed between the two, almost as if it were uncertain who's price path to follow -- urea or anhydrous ammonia. UAN28% favored a more frenzied back and forth tone with only two states unchanged to 32%'s nine states unchanged. The net was the same for both with 28% falling 11 cents and 32% falling 12 cents. We booked nitrogen last week and we maintain it was a smart play, but as we said at the time, we do not expect a sharp runup near-term. This week's price action is about what we expect for the next month or so, but prices will creep steadily higher through that period.

inputsmonitor.comOur advice was predicated on the idea that urea will lead the segment higher knowing full well that anhydrous ammonia is likely to become the nitrogen segment price leader once domestic manufacturing grows a large enough footprint on the global scene. That may take some time and rather than waiting around for price pressure that may or may not come this winter, e have pulled the trigger on a portion of our nitrogen and potash needs for spring while prices were at a very sharp discount to expected new-crop corn revenue. This gives us room to gamble a little, and if prices happen to fall below the level we booked, we will count ourselves fortunate and finish booking for spring at an even better deal.

For now, cover 50% of the nitrogen and potash you will need for corn acres if you already have your total acreage mix decided. If you have undecided acres, book 100% of what you will need to cover those guaranteed corn acres, and wait for direction for the remaining, undecided acres from the corn, soybean and fertilizer markets later on.

December 2017 corn closed at $3.86 on Friday, December 16. That places expected new-crop revenue (eNCR) per acre based on Dec '17 futures at $611.53 with the eNCR17/NH3 spread at -137.18 with anhydrous ammonia priced at a discount to expected new-crop revenue. The spread narrowed 2.21 points on the week.

Nitrogen pricing by pound of N 12/22/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.29 1/4
$0.36 1/2
$0.41
$0.38 3/4
Year-ago
$0.39 1/2
$0.46 3/4
$0.51 1/2
$0.49 1/2

 

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

Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
0
29 1/4 cents
0
0
Urea
NH3 5 cents
36 1/2 cents
7 1/4 cents
2 1/4 cents
UAN28%
NH3 12 cents
41 cents
11 3/4 cents
-1/4 cent
UAN32%
NH3 10 cents
38 3/4 cents
9 1/2 cents
-1/2 cent

 

inputsmonitor.com

 

 

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