The NFiles | Anhydrous Crests Year-ago

Posted on 04/26/2018 11:18 AM

 

  • Anhydrous is $1.10 above year-ago pricing -- higher $7.55/st this week at $524.59.
  • Urea is $11.21 above the same time last year -- higher 10 cents/st this week at $370.41.
  • UAN28% is $8.47 below year-ago -- lower $1.62/st this week to $243.11.
  • UAN32% is priced $4.96 below last year -- higher $4.56/st this week at $272.64.

Anhydrous ammonia led gains in the nitrogen segment this week with Wisconsin correcting $70 higher, Minnesota up $9.37 and Illinois firming $6.41. Three states were unchanged as Missouri fell $1.10 and Iowa dropped 7 cents per short ton.uan price chart

UAN32% was higher on a $53 rise in Ohio as Illinois firmed $2.65 and Wisconsin gained $2.05 per short ton. Five states were unchanged as Minnesota softened $5.47 and Nebraska shucked $4.08.

Urea firmed only slightly on the week with Michigan up $37.71 and Iowa gained $2.54. Two states were unchanged as Illinois fell $21.50, Indiana softened $6.93 and Ohio dropped $6.33.

UAN28% softened on the week led by Minnesota, which softened $7.01 and Ohio fell $4.34. Two states were unchanged with Wisconsin up $6.30 and Iowa gaining $1.68.

This week, with strength in anhydrous, UAN28% has captured the nitrogen segment low. More often than not, that has been a bullish signal for NH3, and usually the rest of the N segment as a whole. I would except urea from that in this case as there is evidence retail urea prices have topped. At the very least, UAN28%'s discount to the rest of the nitrogen segment is a signal of continuing seasonal strength, and lingering near-term upside risk.

urea price chartBut there was another significant technical feature this week... anhydrous firmed above the year-ago peg. The last time NH3 crossed over its year-ago peg was in January 2018 for a short time and before that in October 2014 when our average retail price was around $710 per short ton. Back in 2014, the cross over the prior year's price did not presage a run higher for anhydrous, however. In fact, for nearly a year following that event, anhydrous traced a sideways path through a very narrow range.

From a very simplistic perspective, nitrogen prices have been in decline since 2012. We recorded the lowest nitrogen prices in the life of the Inputs Monitor weekly survey just ahead of harvest 2017 and have trended higher ever since. Now just because we are seeing a price recovery from impressive price lows, there is no reason to believe nitrogen will rush back to the highs -- like the $710 per short ton anhydrous recorded in 2014. Increased efficiencies in U.S. production and decent manufacturing margins will help keep a lid on U.S. nitrogen prices, as will increased domestic supplies.anhydrous ammonia price chart

Having said that, there is certainly upside risk implied by the uptrend. But market watchers are also noting upside potential in corn futures. Better returns on corn will, obviously, mean wider production margins so long as fertilizer is purchased at the right time. There is an important concept in there... upside potential in corn, adds upside risk to nitrogen. There are implications within the energy markets for corn prices and, by extension, fertilizer prices, and market watchers believe firmer WTI crude oil futures will lead to strength across the commodity sector.

As we watch fertilizer prices climb, we expect a post application season decline in prices. But that decline is not likely to tap the lows seen ahead of harvest 2017. We will work aggressively to manage risk through the summer offseason and will book portions for fall 2018 and spring 2019 along the way.

December 2018 corn closed at $4.02 on Friday April 20. That places expected new-crop revenue (eNCR) per acre based on Dec '18 futures at $640.90 with the eNCR17/NH3 spread at -116.31 with anhydrous ammonia priced at a discount to expected new-crop revenue. The spread narrowed 26.25 points on the week.


Nitrogen pricing by pound of N 4/25/18

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.32 1/2
$0.41
$0.43 1/2
$0.42 1/2
Year-ago
$0.32 1/2
$0.40
$0.45
$0.43 1/4

The Margins by lb/N -- UAN28% is a full penny below NH3 this week. UAN32% remains at parity with anhydrous ammonia. Urea maintains a 3 1/2 cent premium to NH3.


Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
0
32 1/2 cents
0
0
Urea
NH3 +5 cents
41 cents
+8 1/2 cents
+3 1/2 cents
UAN28%
NH3 +12 cents
43 1/2 cents
+11 cents
-1 cent
UAN32%
NH3 +10 cents
42 1/2 cents
+10 cents
0

nitrogen indices chart

 

 

 

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