The NFiles: Summer Nitrogen a Falling Knife

Posted on 03/09/2017 10:12 AM

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  • Anhydrous is $142.68 below year-ago pricing -- lower $4.21/st this week at $563.14.
  • Urea is $115.66 below the same time last year -- lower 74 cents/st this week to $351.66.
  • UAN28% is $57.95 below year-ago -- lower $2.22/st this week to $273.21.
  • UAN32% is priced $59.60 below last year -- lower $1.62/st this week at $297.89.

Anhydrous ammonia led declines in nitrogen once again this week, falling $4.21 to a regional average of $563.14. Nebraska was our biggest decliner, falling $43.21 by the short ton. Missouri softened $6.51 and Iowa dropped $3.45. Other declines from state to state were less than 2 bucks per short ton as Ohio and South Dakota are unchanged.

UreaUrea fell 74 cents by the short ton. Downside action was limited by price firmness in Minnesota to the tune of $8.21. Michigan, Indiana and Illinois all fell roughly 5 bucks per short ton with Wisconsin, North Dakota and Ohio all unchanged.

UAN solutions were lower as well with 28% down $2.22 to $273.21 and 32% down $1.62 to $297.89. Michigan and Wisconsin 32% were the biggest decliners, falling $11.20 and $7.44 respectively with Nebraska 28% down $6.43. Indiana led gains in both flavors with 28% up $2.21 and 32% up $5.99 in the Hoosier state. Other gains from state to state were less than a dollar per short ton with several states unchanged on the week.

UANOur outlook calls for steady to lower nitrogen prices for fall. Globally, ammonium nitrate prices are falling sharply which may add extra pressure on UAN. But we believe the greatest influence on U.S. retail nitrogen pricing will be domestic production additions which will support ample supplies and aid the United States in becoming nitrogen self-sufficient in the coming years.

If your preferred retailer has offered you a bid at or below $500 per short ton, go ahead and pull the trigger on at least a portion for fall, but since we expect nitrogen to soften at least mildly through the summer months, exercise caution and leave the market some room to move lower.

December 2017 corn closed at $3.73 on Friday, July 22. That places expected new-crop revenue (eNCR) per acre based on Dec '17 futures at $584.99 with the eNCR15/NH3 spread at -21.85 with anhydrous ammonia at a discount to expected new-crop revenue. The spread firmed 9.23 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.36 1/4 per bushel.

Nitrogen pricing by pound of N 7/28/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.34 1/4
$0.39
$0.48 1/2
$0.46
Year-ago
$0.43 1/4
$0.51 3/4
$0.59 1/4
$0.55 3/4

 

The Margins -- UAN28% is overpriced compared to anhydrous by 2 1/4 cents; UAN32% solution is 1 3/4 cents above NH3 on price. Urea is 1/4 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
34 1/4 cents
0
0
Urea
NH3 5 cents
39 cents
4 3/4 cents
-1/4 cent
UAN28%
NH3 12 cents
48 1/2 cents
14 1/4 cents
2 1/4 cents
UAN32%
NH3 10 cents
46 cents
11 3/4 cents
1 3/4 cent

 

nitrogenMargins

 

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