Nitrogen Softens as P&K Circles the Wagons

Posted on 12/11/2019 1:10 PM

Nitrogen Softens as P&K Circles the Wagons

  • Fertilizer prices were lower across the board this week.
  • Our Nutrient Composite Index (NCI) fell 10.50 points this week to 547.29.

Nitrogen

  • UAN28% was our downside leader in the nitrogen segment this week led by Iowa, which fell $44.58 as Illinois softened $30.61. Gains were small led by Michigan, up $5.19 and Indiana firming 47 cents per short ton.
  • Urea was lower with Wisconsin off $23.60 and Iowa down $19.70. Michigan gained $11.46 as Kansas firmed $1.30 on the week.
  • Anhydrous ammonia was lower on price softness in Michigan, down $22.58 and in Minnesota, off $12.61. North Dakota firmed $7.09 as Nebraska gained $1.67.
  • UAN32% was lower as well with Minnesota down $21.12 and Illinois softening $10.30. Iowa firmed $1.87 and Wisconsin added $1.11.nitrogen indices chart

Nitrogen prices are below their respective year-ago price points at the present time and we expect some mild price softness through the winter offseason. Declines in urea prices suggest domestic production is filling the gap left by a sharp pullback in Chinese urea exports. We expect UAN solutions to continue to shoot the gap around the midpoint between anhydrous and urea prices. But a sharp rise in either urea or anhydrous would likely lead to a run up in UAN as well.

We look for anhydrous to soften below $500 per short ton regionally and for urea to fall about $10 to a regional average of $375. We are looking for UAN28% to fall to $235 which would put 32% around $250 per short ton. At the above levels, we will book for spring and summer applications once a clear price floor is confirmed. Should prices continue to soften into late March, we will stick with the 30% we have already locked in and advise a hand-to-mouth strategy at that time.

But there is upside risk, particularly for NH3 resulting from the propane transport snarl from earlier in the harvest season. As retailers sent trucks in search of propane, those trucks were diverted away from refilling anhydrous supplies. However, post-harvest weather was hit and miss at best, and anhydrous applications came in below expectations. I highlight this risk as something to file away as a reminder to watch offseason anhydrous prices carefully. Since the propane situation has ironed itself out, this may not be a factor, but it is worth noting.

Phosphate

  • Phosphate prices were lower on the week with DAP of $7.84 by the short ton and MAP fell $4.30 regionally.
  • DAP was led lower by Nebraska which fell $40.00 as Minnesota dropped $18.30. Only Michigan posted a higher DAP price this week, up $6.97.
  • MAP prices were driven lower by Wisconsin, which fell $32.70 and by a $12.80 price cut in Iowa. As with DAP, only Michigan firmed, up $2.57 per short ton.
  • According to MosaicCo., wholesale phosphate prices softened at U.S. terminals in the week ended December 6.p and k indices chart

DAP and MAP are each priced in-line with expected new-crop corn revenue suggesting minimal near-term price movement. Phosphate prices have fallen well below the year-ago and five-year average price pegs. While still overpriced compared to anhydrous ammonia, the late summer/early fall price plunge corrected phosphate to levels that better reflect the rest of the fertilizer segment. We do expect some measure of offseason price softness, but since phosphate has already corrected lower, the downside will likely be limited. We look for a late January/early February phosphate price low with DAP falling to $430 regionally, and MAP to soften to $440 per short ton.

Potash

  • Potash was lower this week with Wisconsin falling $12.50 and Minnesota off $5.36. Michigan potash firmed $1.06 as Kansas gained 4 cents per short ton.
  • According to Mosaic Co., wholesale potash prices fell slightly at NOLA and ran sideways in the Corn Belt during the report week.
  • Currently potash is overpriced when compared to anhydrous ammonia but is priced right in-line with phosphates and very near expected new-crop corn revenue per acre.

P&K seem to be circling the wagons as all three are priced very closely together when considered on an indexed basis. While we do expect some offseason price softness, the fact that potash and phosphates are priced in a tight grouping with expected new-crop revenue suggests movement will be slight. That being said, we will be watching for our regional potash price to fall to around $350 per short ton as an opportunity to book for spring needs.

Corn Futures

  • December 2020 corn futures closed Friday December 6 at $3.90 putting expected new-crop revenue (eNCR) at $642.40 per acre.
  • With our Nutrient Composite Index (NCI) at 547.29 this week, the eNCR/NCI spread widened 8.74 points and stands at -95.11.
Fertilizer
11/25/19
12/2/19
Change
Current Week
Fertilizer
Anhydrous
$502.10
$505.52
-$3.97
$501.55
Anhydrous
DAP
$449.61
$449.06
-$7.84
$441.21
DAP
MAP
$444.53
$444.31
-$4.30
$440.01
MAP
Potash
$369.43
$369.17
-$2.55
$366.62
Potash
UAN28
$258.41
$258.52
-$16.39
$242.13
UAN28
UAN32
$277.88
$278.08
-$3.60
$274.48
UAN32
Urea
$389.46
$388.55
-$5.07
$383.48
Urea
Composite
557.59
557.79
-10.50
547.29
Composite

nutrient composite index

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