The NFiles: Urea Slips Below NH3 Price

Posted on 03/09/2017 10:12 AM

NH3"

  • Anhydrous is $119.86 below year-ago pricing -- higher $6.44/st this week at $599.84.
  • Urea is $92.90 below the same time last year -- higher 21 cents/st this week to $373.57.
  • UAN28% is $60.43 below year-ago -- higher $2.76/st this week to $279.87.
  • UAN32% is priced $70.70 below last year -- lower $4.99/st this week at $303.90.

Nitrogen prices continued to creep higher in this week's price action. That comes as no surprise as farmers are hard at work, applying nitrogen ahead of planting corn. Indiana and Missouri led gains in anhydrous ammonia this week, each firming roughly $20 per short ton. North Dakota posts the only NH3 decline this week falling 2 and a half bucks. Anhydrous will continue to firm mildly through the remainder of spring fieldwork and may find continued support through June on demand from sidedressers who are equipped to use NH3 post emerge.

ureaUrea prices have been climbing as well although we expect urea to place a price top sooner than NH3 and UAN. Wholesale price movement suggests price softness through the summer and since we do not expect spring demand to surge, urea prices should remain below $400 per short ton regionally through spring and into the foreseeable future. Gains and declines in this week's price survey were very small. Iowa led gains firming $5.77 per short ton as Ohio fell $4.40. All other price moves were within that range suggesting mild upside potential, if any, near-term. This week, according to our margin analysis, urea is priced below NH3 on both an indexed basis and by the pound of N. We do not expect that fact to impact the rest of the nitrogen segment, however.

UAN prices were mixed this week with 32% correcting lower on sharp declines in Missouri to the tune of $75 below last week's Missouri price. That puts Missouri below the regional average price by about 2 bucks, presenting a value for Show Me State farmers. Other than that, declines in UAN28% and 32% elsewhere were very small and far between. Here again, we expect a summer swoon in prices. Also note 32% has joined urea below the price of NH3 pre pound and on an indexed basis. 32% has been in need of a correction, and this week is priced 3/4 of a cent below NH3 by the price of N per pound.

UANThe message across the nitrogen segment is fairly consistent. Short-term demand-led price strength followed by offseason price pressure. NH3 is the nitrogen source of choice for fall applications and should present buying opportunities late in the coming summer.

December 2016 corn closed at $3.75 on Friday, April 8. That places expected new-crop revenue (eNCR) per acre based on Dec '16 futures at $588.35 with the eNCR15/NH3 spread at 11.49 with NH3 at a premium to December corn futures. The spread narrowed 3.65 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.49 3/4 per bushel.

Nitrogen pricing by pound of N 4/14/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.37
$0.41 1/4
$0.50
$0.46 1/4
Year-ago
$0.44 3/4
$0.51 1/2
$0.61
$0.58 1/2

 

The Margins -- Anhydrous is underpriced compared to UAN28%; UAN28% is overpriced compared to anhydrous by 1 cent; UAN32% solution is 3/4 cent below NH3 on price. Urea is also 3/4 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
37 cents
0
0
Urea
NH3 5 cents
41 1/4 cents
4 1/4 cents
-3/4 cent
UAN28%
NH3 12 cents
50 cents
13 cents
1 cent
UAN32%
NH3 10 cents
46 1/4 cents
9 1/4 cents
-3/4 cent

 

NsPreads

 

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