The NFiles: Anhydrous Firms Sharply

Posted on 03/09/2017 10:12 AM
  • NH3Spread"Anhydrous is $125.16 below year-ago pricing -- higher $19.98/st this week at $593.40.
  • Urea is $93.47 below the same time last year -- higher $1.68/st this week to $373.36.
  • UAN28% is $58.92 below year-ago -- higher $5.46/st this week to $277.10.
  • UAN32% is priced $59.32 below last year -- higher $4.05/st this week at $308.90.

Corn picked the wrong time to nosedive. For several weeks, expected new-crop revenue has been at a premium to one ton of anhydrous ammonia, confirming nitrogen's relative affordability. At the news of USDA's projected 93.6 million acre planting intentions, corn prices dropped like a rock. At the same time, anhydrous was starting to firm on spring demand. So as expected new-crop corn revenue took a hit, anhydrous posted a nearly $20 price hike regionally.

UANAnhydrous should be considered a value in South Dakota according to our weekly price survey which has NH3 down $123 on the week in corrective action. Anhydrous firmed in every other state except South Dakota with Ohio leading gains, firming $90.38 by the short ton. This week will likely mark the largest weekly increase of the season in NH3, but prices will continue to firm as fieldwork continues.

Similar price action in UAN with Missouri, Indiana and Iowa leading gains. Meanwhile, Wisconsin 32% fell $1.28 and Kansas 32% fell 61 cents. Illinois 32% is down $19.70 but Missouri added $51.26; Minnesota 28% is up $23.97 on the week as Indiana added $18.93 to the statewide average UAN28% price. We expect price firmness to continue from now until summertime on both UAN28% and 32%.

Of the four nitrogen products we survey, urea firmed the least this week. Demand strength will be limited the farther north preplant Ureaapplication activity travels as northern growers generally prefer anhydrous for corn rather than urea. As far as price goes, on an indexed basis, urea and NH3 are priced less than a dollar apart and by the pound of N are at parity. I suspect urea will continue to firm, but gains will be mild as global supplies are still ample.

If you have not booked nitrogen for spring/summer, get on the stick as this week's price action strongly indicates the bottom is in.

December 2016 corn closed at $3.69 on Friday, April 1. That places expected new-crop revenue (eNCR) per acre based on Dec '16 futures at $578.26 with the eNCR15/NH3 spread at 15.14 with NH3 at a premium to December corn futures. The spread widened 50.24 points on the week.

This week, the average cash corn price built-in to nitrogen prices is $3.49 per bushel.

Nitrogen pricing by pound of N 4/5/15

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.36 1/4
$0.41 1/4
$0.47 3/4
$0.43 3/4
$0.51 1/2
$0.59 1/2


The Margins -- Anhydrous is underpriced compared to the rest of the nitrogen segment although urea and NH3 are currently aligned at parity; UAN28% is overpriced compared to anhydrous by 3/4 cent; UAN32% solution is 1 1/2 cents above NH3 on price.

Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
36 1/4 cents
NH3 5 cents
41 1/4 cents
5 cents
NH3 12 cents
49 cents
12 3/4 cents
3/4 cent
NH3 10 cents
47 3/4 cents
11 1/2 cents
1 1/2 cents





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