The NFiles | Nitrogen Price Average Examined

Posted on 03/22/2018 4:08 PM

 

  • Anhydrous is $1.79 below year-ago pricing -- higher $7.21/st this week at $514.57.
  • Urea is $9.62 above the same time last year -- higher 4 cents/st this week at $373.93.
  • UAN28% is $7.93 below year-ago -- higher $8.75/st this week to $240.83.
  • UAN32% is priced $9.10 below last year -- higher $11.71/st this week at $271.73.

UAN32% led gains in the nitrogen segment this week with Indiana up $70.80 as Iowa gained $12.17. Four states were unchanged as Ohio fell $21.50 and Minnesota softened $12.20 per short ton.urea price chart

UAN28% firmed with Minnesota up $47.41 as Indiana added $15.39 and South Dakota gained $11.47. Two states were unchanged as Nebraska comprised our only decline in UAN28% this week, down 61 cents per short ton.

Anhydrous ammonia was higher as well with Indiana firming $52.90 as North Dakota gaining $10.29 and Minnesota up $8.53. Four states were unchanged and no state posted a lower price on the week.

Urea was higher but trailed the sharp gains of the rest of the nitrogen segment. Indiana led urea gains, firming $16.44 as South Dakota added $12.79. Only Wisconsin was unchanged as Michigan softened $38.01 and Minnesota fell $6.13.

This week's nitrogen price action carried the entire segment higher. With spring fieldwork underway up into Oklahoma this week, seasonal strength appears to be right on time. Even during nitrogen's nearly five-year downtrend, seasonal strength supported higher prices, especially around this time of the year.

While higher inputs prices are not exactly what one hopes for, dare i say, it could be worse. The chart at right nitrogen indices averaged chartdepicts an average of anhydrous, indexed UAN solutions and indexed urea, and compares that to expected new-crop revenue. A few things jump out at me in looking at this depiction. Since January 2013, nitrogen prices have trended lower. That isn't exactly a newsflash. What is interesting is, not only how persistent that downtrend has been, but also that the price path was interrupted between January and July each and every year shown.

In 2014 the upward tick was sharp and aggressive. The following year, the same up-tick was very slight, but still detectable. I would also point out that, although nitrogen prices are 16.2% higher from the August low, December corn futures have recently firmed in kind. That means, despite higher nitrogen prices, higher new-crop corn futures are acting as a bit of a relief valve.

It has not always been so that corn futures are priced at a relative premium to nitrogen prices. In fact, there were very nearly exactly one and-a-half years when nitrogen prices were above expected new-crop revenue. It took the summer and fall of 2015 to make the transition, but since then, it has been just shy of a year-and-a-half that nitrogen has been at a discount to expected new-crop revenue. I do not know if that timetable is prophetic, but there is the suggestion that nitrogen could be about due to rise to a premium to new-crop revenue.

UAN price chartWe will be watching nitrogen's uptrend very carefully as seasonal strength could inject upward momentum that will continue into late summer. If nitrogen is setting up to recapture its premium to new-crop revenue, we will book at least a portion of our spring 2019 nitrogen when we book for fall 2018.

For the time being, the spread between corn returns and nitrogen prices is still greater than $100. But we do not want that to get away from us, and we will be quick to take advantage in an effort to maintain profitability in the production budget.

December 2018 corn closed at $4.03 on Friday, March 16. That places expected new-crop revenue (eNCR) per acre based on Dec '18 futures at $642.60 with the eNCR17/NH3 spread at -128.03 with anhydrous ammonia priced at a discount to expected new-crop revenue. The spread narrowed 14.01 points on the week.


Nitrogen pricing by pound of N 3/22/18

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.31 1/2
$0.41 1/4
$0.43
$0.42
Year-ago
$0.31 1/2
$0.40 1/2
$0.44 3/4
$0.44

The Margins by lb/N -- UAN32% is at a 1/2 cent premium to NH3. Urea is 4 3/4 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
31 1/2 cents
0
0
Urea
NH3 +5 cents
41 1/4 cents
+9 3/4 cents
+4 3/4 cents
UAN28%
NH3 +12 cents
43 cents
+11 1/2 cents
-1/2 cent
UAN32%
NH3 +10 cents
42 cents
+10 1/2 cents
+1/2 cent

nitrogen indices chart

 

 

 

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