Anhydrous Falls Below $600

Posted on 07/17/2019 1:06 PM

 

  • Fertilizer prices were lower on the week with UAN solutions slightly higher.
  • Our Nutrient Composite Index (NCI) softened 2.38 points to 626.60.

Nitrogennitrogen indices

  • Anhydrous ammonia was our downside leader in the nitrogen segment this week with Ohio falling a corrective $112.30 by the short ton. Michigan and Kansas also posted declines as Minnesota firmed $2.41 to lead gains.
  • Urea was lower on the week but remains priced well above anhydrous ammonia. North Dakota and Ohio led declines as Missouri, Minnesota and Wisconsin all firmed slightly.
  • UAN solutions were higher, but both feature mostly unchanged price action from state to state.

The eastern Corn Belt has been a tale of weather woes. On a recent drive across the I-80 corridor, your editor observed the startling amount of unplanted and late planted acres, and acres in various stages of distress in Illinois, Indiana and especially in Ohio. It was a narrow window as my family and I drove from central Iowa to D.C., but it was a sobering indication of how bad this year has been so far for some of our brethren in the eastern Belt and elsewhere.

Then this week, Ohio anhydrous ammonia softened more than $100 bucks per short ton statewide. In one fell swoop, our Ohio anhydrous price erased everything that had been gained since the first week of October 2018. That begs a question... given that similar problems are scattered across most of the nation's farm country, will nitrogen prices act similarly in other states?

The logical answer, with an eye toward risk management and responsible reporting, would be, 'don't count on it.' But the responsible answer to a question like that is not always correct; safe? yes. But only time will tell if the rest of the Corn Belt can expect nitrogen prices to peel off the gains it spent the entire winter building.

On one hand, recall the talk of fall nitrogen NOT applied in fall 2018. Then spring 2019 transport delays coupled with heavy rains made fieldwork impossible for many. Logically, this should add up to a surplus of Nitrogen across corn country. Normally, a surplus would signal lower prices ahead. But the fall and winter fertilizer shipments, however delayed in 2018-19, were purchased in an uptrending market, and retailers may not have much downside wiggle room on price when moving leftover supplies.anhydrous ammonia chart

On the other hand, there is room for hope for lower nitrogen prices ahead where retailers have excess supplies and may be running out of storage space. In addition, the increased nitrogen manufacturing capabilities in the U.S. have now had the chance to get their feet under them and they may be long on supply as well. I believe there is a better chance nitrogen price pressure will come first from the wholesale side rather than beginning with retail product. But pressure in the wholesale market eventually ends up manifesting at your preferred supplier.

So for now, since the industry really isn't saying much of note on the subject, let's move forward expecting just a slight offseason price dip, keeping in mind that Ohio NH3 is more of an exception than the rule. I maintain my current NH3 fall price projection at a regional average around $580 per short ton. However, Ohio certainly has caught our attention and shown us that this year's planting difficulties may have a silver lining in forcing nitrogen prices lower for fall.

We will talk about projections for 95 to 100 million acres of corn planted next year with all of this in mind next week.

Phosphatep and k indices chart

  • Both DAP and MAP were lower on the week with MAP leading the way down. In fact, no state posted a higher MAP price on the week as North Dakota and Ohio led to the downside.
  • DAP was led lower by Kansas and Michigan as Wisconsin and Minnesota posted higher DAP prices this week.
  • According to MosaicCo., wholesale DAP and MAP prices fell in the week ended July 12. Wholesale sulphur was also slightly lower on the week.

Potash

  • Potash was lower on the week with Michigan and Wisconsin leading the way downward. Illinois added $1.33 and Wisconsin gained 81 cents by the short ton.
  • MosaicCo. also reported lower wholesale potash prices at U.S. terminals during the report week.
  • With the sharp downturn in anhydrous pricing this week, the gap between anhydrous ammonia and our indexed potash price narrowed, but the spread still favors lower anhydrous in the coming weeks.

Corn Futures

  • December 2019 corn futures closed Friday July 12 at $4.22 putting expected new-crop revenue (eNCR) at $698.72 per acre -- higher $7.04 per acre on the week.
  • With our Nutrient Composite Index (NCI) at 626.60 this week, the eNCR/NCI spread widened 9.42 points and now stands at -72.12.
Fertilizer
7/1/19
7/8/19
Change
Current Week
Fertilizer
Anhydrous
$607.92
$605.67
-$10.23
$595.44
Anhydrous
DAP
$505.38
$505.96
-47 cents
$505.49
DAP
MAP
$525.68
$524.62
-$2.31
$522.32
MAP
Potash
$393.48
$393.23
-85 cents
$392.38
Potash
UAN28
$281.61
$281.50
+6 cents
$281.56
UAN28
UAN32
$316.71
$316.68
+48 cents
$317.16
UAN32
Urea
$430.04
$428.29
-$1.86
$426.44
Urea
Composite
629.87
628.98
-2.38
626.60
Composite

nutrient composite index chart

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