The NFiles: UAN Firms on Late-season Demand

Posted on 03/09/2017 10:12 AM

 

  • Urea"Anhydrous is $133.39 below year-ago pricing -- lower $2.11/st this week at $574.20.
  • Urea is $100.42 below the same time last year -- lower $3.34/st this week to $362.73.
  • UAN28% is $58.28 below year-ago -- higher 26 cents/st this week to $277.94.
  • UAN32% is priced $64.37 below last year -- higher $1.03/st this week at $299.63.

Urea joins the 100 club this week, now priced $100.42 below last year's price at this time. Urea was our downside leader in this week's nitrogen price action, led by South Dakota and Minnesota, each down roughly 15 bucks on the week. Indiana and Nebraska posted urea price gains, but less than $1.50 in each state. All other states were unchanged to slightly lower. Also of note this week, urea by the pound of N is at parity with anhydrous ammonia according to expected margins. Since thin N margins generally point to a closer walk with corn prices -- which are bound to rise -- we are somehow pleased to see UAN buck the trend, and firm on the week, widening its margins with NH3, and remaining at a discount to expected new-crop corn revenue.

UANUAN solutions firmed in this week's price action as Indiana firmed in both flavors by a combined $33.20. Other gains were mild and about half of the states in our survey are unchanged on the week. We have expected UAN solutions to be the last nutrient to fall as spring applications came to an end on the basis of post emerge sidedress demand, and we believe that to be the case here. That suggestion is, since only one Eastern Belt state urged our regional price higher, and the hour is getting late for nitrogen applications short of flown-on product. We expect UAN solutions to at least level-off next week and probably fall st least slightly near-term.

Anhydrous fell this week with Michigan leading declines, falling $17.94 by the short ton. Kansas NH3 fell $$4.31 as Minnesota, Iowa and Indiana softened slightly. Nebraska led gains in anhydrous, adding $2.30 along with a 29 cent price hike in Illinois. All other states were unchanged.

NH3Natural gas prices hit multi-year highs in Tuesday's trade which may put a floor under U.S. produced nitrogen. But nitrogen did not take the bait when corn futures rallied over the past few weeks, and remains priced at a discount to expected new-crop revenue, even though Dec 2016 futures fell back below $4.00.

December 2016 corn closed at $3.94 on Friday, June 24. That places expected new-crop revenue (eNCR) per acre based on Dec '16 futures at $620.28 with the eNCR15/NH3 spread at -46.08 with anhydrous ammonia at a discount to expected new-crop revenue. The spread firmed 88.67 points on the week. On that same Friday, December 2017 futures closed at $3.96. This will be our last month tracking Dec 2016 futures and as we make the switchover to Dec 2017 futures, expected new-crop revenue based on that contract is at $625.13 per acre.

This week, the average cash corn price built-in to nitrogen prices is $3.42 3/4 per bushel.

Nitrogen pricing by pound of N 6/28/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.35 1/4
$0.40 1/4
$0.49 1/2
$0.46 3/4
Year-ago
$0.43 1/2
$0.51 1/4
$0.60
$0.56 3/4

 

The Margins -- UAN28% is overpriced compared to anhydrous by 2 1/4 cents; UAN32% solution is 1 1/2 cent above NH3 on price. Urea is at parity with 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 1/4 cents
5 cents
0
UAN28%
NH3 12 cents
49 1/2 cents
14 1/4 cents
2 1/4 cents
UAN32%
NH3 10 cents
46 3/4 cents
11 1/2 cents
1 1/2 cent

 

NsPreads

 

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