The NFiles: Upward Momentum Builds

Posted on 03/09/2017 10:12 AM

 

  • Anhydrous is $63.54 below year-ago pricing -- higher $11.24/st this week at $501.71.
  • Urea is $1.75 below the same time last year -- higher $2.57/st this week to $358.41.
  • UAN28% is $26.57 below year-ago -- higher $3.60/st this week to $241.79.
  • UAN32% is priced $33.87 below last year -- higher $1.83/st this week at $274.78.

inputsmonitor.com"Anhydrous ammonia leapt higher this week led by a $55.00 increase in Wisconsin followed by Kansas which gained $29.27 and Nebraska added $18.47. Only Michigan was unchanged on the week as declines were limited to Iowa which fell $6.89.

UAN28% was led higher by strength in North Dakota to the tune of $12.40 Minnesota firmed $8.14 and Indiana gained $4.63. Wisconsin and Missouri were unchanged as Nebraska fell 34 cents per short ton -- the only state to post a lower UAN28% price on the week.

inputsmonitor.comUrea was higher on the week led by North Dakota which firmed $9.03, Nebraska gained $7.33 and Minnesota added $5.96. Missouri was unchanged as Illinois softened $2.96 and Wisconsin fell $1.28.

UAN32% posted the smallest gains in the nitrogen segment. Minnesota firmed $38.65, Indiana added $2.32 and Kansas firmed 81 cents per short ton. Four states were unchanged as Ohio fell $10 to lead declines as Iowa declined $5.74 and Wisconsin softened $2.56.

With anhydrous ammonia's aggressive move higher this week, we note that all four of our nitrogen products are pointed squarely in the same direction and are recovering, from a visual standpoint, at the inputsmonitor.comsame angle. In other words, the recovery is well underway and NH3, urea and UAN are al in agreement that there is much ground to be made up,. The spread between our nitrogen products and expected new-crop corn revenue remains wide so there is still time to take advantage of favorably priced nitrogen for spring.

We had heard mutterings from dealers that nitrogen could firm by as much as $50/ton, and this week, anhydrous in Wisconsin is up $55/ton. Most states favored a milder approach to the upside, but there are states that posted $20 and $30/ton nitrogen increases on the week. The time to get caught up is now. Get current to 100% filled on spring nitrogen as inputsmonitor.comwe expect nitrogen price increases to continue. At this point, it is very unclear how high the current uptrend will take prices, but it is not out of the question for nitrogen to close the gap significantly between itself and expected new-crop revenue. That level is $130/ton away for anhydrous, but if more states add $20, $30 or even $50 per ton in successive weeks, that gap will shrink in a hurry. The safe money will proceed with that upside risk in mind, and book accordingly.

It was urea that originally made me a fertilizer price bull, and urea's influence over the rest of the segment has been proven. Since China is backing off on urea production and exports, and the USA is bringing nitrogen production increases online, we may see anhydrous act as a price leader during the coming years. Anhydrous is something of a boutique product when it comes to fertilizers and is most popular among US farmers. If the USA can reach nitrogen self-sufficiency, urea's influence will loosen. But self-sufficiency is a ways off yet, and we will continue to watch urea for indications of upcoming nitrogen price trends. Having said that, urea did continue higher this week, which suggests nitrogen prices have plenty of near-term upward momentum.

December 2017 corn closed at $3.94 on Friday, February 17. That places expected new-crop revenue (eNCR) per acre based on Dec '17 futures at $630.99 with the eNCR17/NH3 spread at -129.28 with anhydrous ammonia priced at a discount to expected new-crop revenue. The spread narrowed 19.17 points on the week.

Nitrogen pricing by pound of N 2/22/17

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.30 3/4
$0.39 3/4
$0.43 1/2
$0.43
Year-ago
$0.34 3/4
$0.40
$0.47 1/2
$0.47 3/4

 

The Margins -- UAN32% is at a 2 1/4 cent premium to NH3. Urea is 4 cents above anhydrous ammonia; UAN28% solution is priced 3/4 cent above NH3.

Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
0
30 3/4 cents
0
0
Urea
NH3 5 cents
39 3/4 cents
9 cents
4 cents
UAN28%
NH3 12 cents
43 1/2 cents
12 3/4 cents
3/4 cent
UAN32%
NH3 10 cents
43 cents
12 1/4 cents
2 1/4 cents

 

inputsmonitor.com

 

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