The NFiles: Urea Perks Up

Posted on 03/09/2017 10:12 AM

 

  • Anhydrous is $175.46 below year-ago pricing -- lower $5.01/st this week at $469.70.
  • Urea is $102.18 below the same time last year -- higher $2.29/st this week to $313.27.
  • UAN28% is $67.23 below year-ago -- higher 54 cents/st this week to $226.57.
  • UAN32% is priced $76.84 below last year -- higher 56 cents/st this week at $247.29.

InputsMonitor.com"Anhydrous ammonia was our only decliner in the nitrogen segment, falling $5.01 regionally. Michigan led declines, softening $32.45 as Indiana dropped $6.83 and Nebraska fell $6.53. Three states were unchanged as gains were limited to 81 cents in Illinois and 6 cents in Iowa.

UAN28% was led higher by Illinois which firmed $19.36. Only Kansas joined Illinois price strength, adding just 20 cents per short ton. Ohio fell $12.50 as Wisconsin softened $11.07. Four of twelve states were unchanged.

UAN32% was higher as well led by Illinois which added $11.06 and Minnesota which firmed $1.88. Six of twelve states were unchanged as Nebraska fell $4.57 to led 32% declines as both Iowa and Kansas fell 75 cents.

InputsMonitor.comUrea led nitrogen segment gains firming $2.29 regionally. Once again, Illinois led gains, firming $16.04 as Wisconsin added $8.97. Only South Dakota and Missouri were unchanged on the week as both upward and downward price moves were generally very mild.

Last week, by the pound of N, anhydrous held a slight premium to UAN and urea. This week, with even mild price firmness by the short ton, and price softness in NH3 overall, urea flips to a premium to anhydrous ammonia. Urea has been in a general state of price decline since the Inputs Monitor's inception, so we really don't know what a urea rally would look like or how to account for seasonality and demand features. What we do know is that coal prices in China are still rising, and manufacturers in that country still want to rebalance supplies more in favor of sellers. That alone could easily account for the mild price increase.

InputsMonitor.comBut urea is not that far out of line with the rest of the nitrogen segment, holding just a 1/4 cent premium to NH3 by the pound of N. We suspect domestic production here in the States will offset Chinese supply manipulation, but it may take some time. I may be inclined to pull the trigger on half of our expected urea needs for spring in a week or two if urea prices want to forge a bottom here, just in case springtime supplies limit the downside through the winter. Stay tuned on that.

Other than that, since UAN28 and 32 are priced below anhydrous by the pound of N, we feel no urgency to book for spring just yet -- the same goes for anhydrous.

December 2017 corn closed at $3.82 on Friday, November 18. That places expected new-crop revenue (eNCR) per acre based on Dec '17 futures at $604.75 with the eNCR15/NH3 spread at -135.05 with anhydrous ammonia priced at a discount to expected new-crop revenue. The spread widened 11.15 points on the week.

Nitrogen pricing by pound of N 11/22/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.29
$0.34 1/4
$0.40 1/4
$0.38 3/4
Year-ago
$0.39 1/2
$0.46 1/2
$0.53
$0.51 1/4

 

The Margins -- UAN32% is underpriced by 1/4 cent compared to NH3. Urea is 1/4 cent above anhydrous ammonia; UAN28% solution is priced 3/4 cent below NH3.

Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
0
29 cents
0
0
Urea
NH3 5 cents
34 1/4 cents
5 1/4 cents
1/4 cent
UAN28%
NH3 12 cents
40 1/4 cents
11 1/4 cents
-3/4 cent
UAN32%
NH3 10 cents
38 3/4 cents
9 3/4 cents
-1/4 cent

 

 

 

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