The NFiles | Indiana Declines Pressure Nitrogen

Posted on 03/13/2018 3:27 PM

 

  • Anhydrous is $9.00 below year-ago pricing -- lower $1.52/st this week at $507.36.
  • Urea is $11.68 above the same time last year -- higher $3.91/st this week at $373.89.
  • UAN28% is $16.82 below year-ago -- higher $1.36/st this week to $232.08.
  • UAN32% is priced $21.05 below last year -- lower $6.63/st this week at $260.02.

Urea led gains in the nitrogen segment on a $43.57 rise in Wisconsin as Michigan added $15.25. No state was unchanged as Indiana fell $16.30 to lead declines as South Dakota softened $5.40.

UAN28% was higher as well with Michigan up $9.08 and North Dakota gaining $8.61. Only Missouri was unchanged as Indiana softened $14.66 and Illinois dropped $4.84.UAN chart

UAN32% led declines falling a hefty $6.63 on the week. Indiana fell $66.90, Illinois dropped $30.30 and Ohio skidded $13.50 lower on the week. Three states were unchanged as Wisconsin added $18.60, Michigan firmed $11 even and Minnesota fell $7.40.

Anhydrous ammonia was lower on the week as well with Indiana off $41.74 and Ohio down $1.46. Only 2 states were unchanged as South Dakota gained $8.33 and Iowa firmed $4.23.

The headline chasers are at it again this week. After an article surfaced last week suggesting South American crop problems could support higher fertilizer prices, this week, the industry is focused on longer-term nitrogen demand prospects, touting their expectations for another slump in nitrogen prices by the end of 2018. Click here to read the post.

While the article is focused on stock valuations, there are some valid points in the text. Chinese fertilizer production will resume at some point. Domestic production here at home is increasing quickly, and energy prices, especially natural gas, are priced low enough to weigh on finished nitrogen products here at home.urea chart

I would take issue with the article's supposition that demand is set to fall. Increased supplies and availability is what will pressure nitrogen prices moving forward. South American production is increasing. As yields there increase, so will nitrogen demand. The same is true of China as that nation looks to increase its agricultural production in the face of a bulging population and growing middle class.

Meanwhile, U.S. farmers have been focused on efficiency -- a healthy side-effect to lower crop returns and tighter production margins. Demand may slip slightly in the United States as long as corn prices bear a 3-handle. In season sidedress activity has also helped cut down on fall and preplant applications, and that is likely to continue on the basis of its agronomic benefits. But demand declines in the United States are not likely to be significant enough to weigh on total world demand.

This week, nitrogen fell on a sharp drop in Indiana. Recall our analysis in last week's P&KToday which examinednh3 chart the relationship of NH3 to our indexed potash figure. the two remain very near parity this week and that may indicate anhydrous has exhausted itself. We believe anhydrous will continue higher and top out around $525 regionally before backing off to rejoin potash at parity somewhere around $500 per short ton regionally.

Plant '18 is underway in parts of the deep south and will soon be making its way northward. That will mean vigorous preplant fieldwork and seasonal demand for N. You should be 100% filled on spring and summer nitrogen needs. We expect prices to fall through the summer offseason and lend opportunities to book for fall applications then.

December 2018 corn closed at $4.07 on Friday, March 2. That places expected new-crop revenue (eNCR) per acre based on Dec '18 futures at $649.40 with the eNCR17/NH3 spread at -142.40 with anhydrous ammonia priced at a discount to expected new-crop revenue. The spread widened 6.62 points on the week.


Nitrogen pricing by pound of N 3/13/18

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.30 3/4
$0.41 1/4
$0.41 1/2
$0.41
Year-ago
$0.31 1/2
$0.40 1/4
$0.44 3/4
$0.44 1/4

The Margins by lb/N -- UAN32% is at a 1/4 cent premium to NH3. Urea is 5 1/2 cents above anhydrous ammonia; UAN28% solution is priced 1 1/4 cent below 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
41 1/4 cents
+10 1/2 cents
+5 1/2 cents
UAN28%
NH3 +12 cents
41 1/2 cents
+10 3/4 cents
-1 1/4 cents
UAN32%
NH3 +10 cents
41 cents
+10 1/4 cents
+1/4 cent

nitrogen indices chart

 

 

 

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