The NFiles: Urea Threatens to Drag N Higher

Posted on 03/09/2017 10:12 AM

 

  • Anhydrous is $166.19 below year-ago pricing -- higher $3.83/st this week at $475.53.
  • Urea is $90.53 below the same time last year -- higher $2.77/st this week to $321.73.
  • UAN28% is $57.00 below year-ago -- higher $3.02/st this week to $231.67.
  • UAN32% is priced $69.40 below last year -- lower $2.89/st this week at $248.54.

inputsmonitor.com"Anhydrous ammonia led nitrogen gains this week firming $3.83 by the short ton. The Dakotas were sharply higher on the week with North Dakota up $20.03 and South Dakota firming $24.44. Gains in other states were limited. Three states were unchanged as Nebraska fell $5.66 to lead declines and Illinois dropped $2.17.

Similar price action was noted in urea with only two states posting a lower price per short ton. North Dakota firmed $11.85 to lead gains followed by South Dakota and Missouri, both of which were up about 7 bucks. Only Iowa and Ohio were unchanged as Nebraska fell $2.87 and Indiana fell $2.42.

UAN28% followed urea and NH3 higher led by Wisconsin which firmed $42.63 and Minnesota up $7.98. Five states were unchanged as Indiana led declines falling $6.67 per short ton, Iowa down $6.45 and Illinois falling $2.16.

inputsmonitor.comUAN32% was our only decliner in the nitrogen segment. Indiana led the charge lower falling $41.70 on the week as Iowa dropped $3.29 and Nebraska shucked $1.22 to round out declines. Five states were unchanged as Kansas firmed all of 74 cents per short ton to lead gains along with Illinois up 56 cents and Minnesota adding 15 cents per short ton statewide.

We pulled the trigger on nitrogen and potash needs for base corn acres this week and advised growers take advantage of current low fertilizer prices. The amounts you should book depend on the corn acres you intend to plant at this time. We understand acreage mixes are still highly uncertain, but most growers know the minimum amount of corn acres they will plant no matter what. Cover nitrogen and potash for those acres only. In this way, we can manage our expenditures through the year and growers will be able to gauge corn's profit potential based partly on fertilizer prices through winter. In other words, if fertilizer prices remain low, it will give some the go-ahead to plant more corn acres. If nitrogen prices surge to a level making it difficult to profit from corn acres in the coming marketing year, it can be taken as a cue to send more acres over to soybean production.

inputsmonitor.comUrea has put us on edge. A look at the table below shows urea is overpriced compared to the rest of the nitrogen segment by 1 1/2 cents per pound of N. while we have seen that margin wider than 1 1/2 cents, we are not willing to risk urea pulling the rest of the nitrogen segment higher. Chinese producers created an oversupply situation around the world that pressured the nitrogen segment to current levels, and we believe urea may have the power to be an upside leader just as easily as it was our leader on the way down. We do not expect a huge run-up in N prices through winter, but retailers are not likely to take the bait as growers try to wait for demand discovery to pressure prices late in the winter.

Our alert recommended to book 50% of needs as an estimation of how many corn acres are a sure bet for spring, but the percentage of total acreage mixes on your farm will vary at this point. So book what you will need for your baseline corn acres and we will look for opportunities from here on out to fill more, which will be for acres which are at this point undecided.

December 2017 corn closed at $3.88 on Friday, December 9. That places expected new-crop revenue (eNCR) per acre based on Dec '17 futures at $614.92 with the eNCR15/NH3 spread at -139.39 with anhydrous ammonia priced at a discount to expected new-crop revenue. The spread widened 14.80 points on the week.

Nitrogen pricing by pound of N 12/15/16

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.29 1/2
$0.36
$0.41
$0.38 3/4
Year-ago
$0.39 1/4
$0.46 1/4
$0.51
$0.49 1/4

 

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

Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
0
29 1/2 cents
0
0
Urea
NH3 5 cents
36 cents
6 1/2 cents
1 1/2 cents
UAN28%
NH3 12 cents
41 cents
11 1/2 cents
-1/2 cent
UAN32%
NH3 10 cents
38 3/4 cents
9 1/4 cents
-3/4 cent

 

inputsmonitor.com

 

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