Phosphate was higher on the week as potash softened.
- DAP $74.79 below year-ago pricing -- higher 44 cents/st on the week to $486.95/st.
- MAP $99.42 below year-ago -- higher 15 cents/st this week to $500.28/st.
- Potash $131.26 below year-ago -- lower $1.53/st this week to $352.23/st.
- The average cash corn price figured in to P&K this week is $3.44 3/4 per bushel.
The national average corn basis firmed 1/4 cent from last week to 6 3/4 cents below July futures. The national average cash corn price firmed 9 cents from last week to $4.07. Basis is softer than the three-year average, which is 20 cents above futures for this week.
Phosphates firmed this week but just by a few dimes. The longer term outlook calls for softer retail phosphate prices through the summer. That could bring more demand into the market as phosphate has been overpriced compared to the rest of the fertilizer segment for quite some time. In fact, Map has been our highest priced nutrient since about this time last year. The margin between DAP and MAP are a little more narrow than we expect which may suggest price pressure on both near-term.
Both DAP and MAP, however, are priced below expected new-crop revenue on an indexed basis so phosphates could be considered a technical value. But the fact remains phosphate is overpriced. Robust production out of Russia, China and the Middle East may put pressure on global bids, and the industry expects that scenario would excite demand. That would likely excite production as well as producers look to capitalize on improved demand.
Potash producers are still awaiting price guidance from China via their annual import contract. That price is generally set in January and places the annual price floor for global potash trade. This year may be the first time since 2009 that Chinese exporters do not sign an official contract. Actually, we have recommended a hand-to-mouth approach on potash and it appears China is taking the same approach.
It is unclear whether potash prices will continue to drift lower as a form of price discovery or if global inventories are heavy enough to put fundamental pressure on retail prices. As phosphate is priced at the top of the range of fertilizer prices we survey, potash has been at the bottom for much longer, since March 2014, in fact. We had expected potash to level off when it aligned with expected new-crop revenue's late December low, but as corn futures firmed from there, potash continued to fall, right into the present day. On an indexed basis, potash is currently priced 21.6 percent below expected new-crop revenue, representing an excellent value for farmers.
Once the outlook finds some clear direction, either from Chinese importers or supply side management, or some other news item, we will act accordingly. We may find ourselves in a situation where exporters give up on waiting for China to contract supplies, and go ahead and set the price floor themselves by rebalancing supplies. Either way, we are watching for indications of a price floor and we will book portions of fall and spring 2017 needs on signs of a price rebound.
I wrote an article for this week's Inputs Monitor titled "P&K Producers Dovish on Global Competition" which explores North American P&K production strategies and compares attempts by those producers to balance supplies with Saudi Arabia's role in balancing global crude oil supplies. The article suggests that while North American P&K producers have curtailed production in an effort to maintain margins, they may have done so at the expense of global marketshare.
By the Pound --
The following is an updated table of P&K pricing by the pound as reported to your Inputs Monitor for the week ended May 27, 2016.
DAP is priced at 50 1/2 cents/lbP2O5; MAP at 47 cents/lbP2O5; Potash is at 29 1/4 cents/lbK2O.
P&K pricing by the pound -- 6/3/2016