Inputs Market Update: The Peanut Gallery Weighs In

Posted on 03/09/2017 10:25 AM

 

Gains tallied $0.00 to Declines' $47.40 in the regional averages.

NH3"Anhydrous ammonia posted the smallest decline in our fertilizer price survey this week, falling $1.53 regionally (a 0.17% decline from last week). But that slight movement in the regional average price is deceiving. The underlying price performance was very tumultuous with several states posting hefty double-digit gains and declines. Anhydrous is still priced below expected new-crop revenue, however, and the underlying action is a sign the market is trying to sort itself out. UAN and urea were decidedly lower with most states posting declines which were propped up by just one or two states bucking the downward trend.

Urea and UAN32% are priced below anhydrous on an indexed basis. UAN28% posted the largest decline in this week's regional averages, falling $12.82 by the short ton. UANAn interesting mathematical note on nitrogen prices this week has caught my eye, however. If we average the indexed values of UAN28 & 32% and urea, we arrive at $549.19, just 0.16 points above our actual anhydrous ammonia price this week. In other words, by committee, the non-anhydrous "peanut gallery" of nitrogen products all agree that anhydrous is priced right regionally, and is where they should be as well. If this committee is to act individually to fall in line with anhydrous, we need mild strength in urea and 32% next week -- considering anhydrous and 28% hold steady.

Bear in mind, there are a lot of factors at play here including local supplies, price discovery and demand features that hold sway over prices at individual locations. We will dig deeper into this in this week's TheNFiles, and look at prices by the pound of N for more guidance. For now, we see no need to chase prices lower, and we expect Indiana, which is priced way above our regional average to soften between now and harvest. Hold off for now on booking N for fall.

PhosphateP&K were lower on the week with just a few states higher on the week. If we include phosphate in our peanut gallery of non-anhydrous products, we note DAP and MAP have a huge amount of downside work to do if they are to reflect nitrogen price softness. Phosphate production is a complicated process and since North American retailers are heavily reliant on imported product, price softness should be limited near-term. Also bear in mind that wholesalers may be eyeing demand increases thanks to USDA's 175.1 bu per acre projected national average corn yield on the basis of high removal rates. That will also keep a floor under phosphate prices. On potash, its all about the oversupply, and while there were three states pressing higher and one state unchanged on potash this week, most states were moderately lower.

Fuels are lower this week as well. Distillate production ahead of harvest must surely have picked up by now, driving prices lower ahead of the harvest demand push. But crude oil and heating oil futures are looking mildly bullish this week so this week's regional average price of $1.78 per Dieselgallon may prove to be the summer low. We will watch for a "V" bottom in diesel next week and if prices turn higher, we will book at least some for fall fieldwork. Propane slid two cents this week in a surprising late summer downward move. This could signal weak demand and, here again, if prices turn around and head higher next week, we will book supplies for harvest grain drying and confinement operations for winter. We already have our home heat covered, but we had advised to hold off of a late summer price dip before booking for agricultural use and for livestock operations. This may be the dip we were looking for.

There is a lot going on regionally in farm fuels and fertilizers so stay tuned to your Inputs Monitor for perspective.

Corn Futures -- December 2017 corn futures closed Friday, August 12 at $3.73 putting expected new-crop revenue (eNCR) at $584.99 per acre -- up 1.68 on the week. With our Nutrient Composite Index (NCI) at $551.92 this week, the eNCR/NCI spread widened 12.98 points and now stands at -33.07. This means one acre of expected new-crop revenue is priced at a 33.07 premium to our Nutrient Composite Index.

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Nutrient/Fuel
8/1/16
8/8/16
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$550.59
$550.01
-$1.53
$549.06
Anhydrous
DAP
$466.03
$465.91
-$5.00
$461.03
DAP
MAP
$478.66
$481.16
-$5.73
$472.93
MAP
Potash
$334.37
$334.75
-$5.61
$328.76
Potash
UAN28
$274.75
$273.24
-$12.82
$261.93
UAN28
UAN32
$285.74
$285.27
-$7.86
$277.88
UAN32
Urea
$344.32
$344.14
-$8.81
$335.52
Urea
Farm Diesel
$1.83
$1.80
-2 cents
$1.78
Farm Diesel
LP
$0.98
$0.98
-2 cents
$0.96
LP
Composite
563.43
563.22
-11.30
551.92
Composite

 

Index

 


 

 

 

 

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