The NFiles | Dec. Futures Higher as N Firms

Posted on 03/01/2018 11:41 AM

 

  • Anhydrous is $3.77 below year-ago pricing -- higher $1.88/st this week at $505.83.
  • Urea is $5.44 above the same time last year -- higher 89 cents/st this week at $3667.36.
  • UAN28% is $18.37 below year-ago -- higher $2.04/st this week to $230.21.
  • UAN32% is priced $17.68 below last year -- higher 92 cents/st this week at $260.65.uan chart

UAN28% led gains in the nitrogen segment with Ohio and Indiana up just a little more than $10 per short ton as South Dakota firmed $7.80. Six states were unchanged as Kansas was our sole decliner, falling $4.53.

Anhydrous ammonia was higher, led by Indiana, which firmed $15.43 and Ohio gained $13.09. Seven states were unchanged as Kansas fell $5.81 and Iowa softened $1.04.

Urea was led higher by Indiana, which firmed $12.07 and Ohio added $7.54. Four states were unchanged as Kansas fell $6.83 and Nebraska shucked $4.52.

UAN32% was higher on gains in Nebraska, adding $6.70, Kansas gained $2.05 and Iowa firmed $1.42. Nine states were unchanged and no state posted a lower UAN32% price.urea chart

We booked our remaining nitrogen needs for spring and summer applications last week as market fundamentals were stoking upside risk. The only thing that has changed this week are nitrogen prices, which are all higher. The fundamentals have not changed, and we expect nitrogen to continue higher from here.

Briefly, the fundamentals fueling the current nitrogen rally include curtailed Chinese urea production, higher raw ammonia prices year-on-year, higher U.S. natural gas prices ahead of offseason refill and rising transport costs. Eastern Corn Belt growers have the added problem of flooding at present which threatens to leach nitrogen applied in the fall. That could bring in stronger than expected demand for spring nitrogen with the added supply draw of replacement N for flooded out acres.

To the good, December futures have adopted a four-handle this week, widening the discount fertilizer prices hold to expected new-crop revenue. In addition, due to robust fall nitrogen applications, areas not impacted by floodinganhydrous chart should enjoy ample supplies.

Ample supplies, however, are not likely to pressure retail fertilizer prices this spring, although lower natural gas prices may lead to lower fertilizer production costs during the summer offseason, leading to decent opportunities in late summer 2018 to book for fall and for spring 2019.

December 2018 corn closed at $3.97 on Friday, February 23. That places expected new-crop revenue (eNCR) per acre based on Dec '18 futures at $632.40 with the eNCR17/NH3 spread at -126.57 with anhydrous ammonia priced at a discount to expected new-crop revenue. The spread narrowed 1.88 points on the week.


Nitrogen pricing by pound of N 2/28/18

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.30 3/4
$0.40 3/4
$0.41
$0.41
Year-ago
$0.30 3/4
$0.40 1/4
$0.44 1/4
$0.43 1/4

The Margins by lb/N -- UAN32% is at a 1/4 cent premium to NH3. Urea is 5 cents above anhydrous ammonia; UAN28% solution is priced 1 3/4 cent below NH3.


Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
0
30 3/4 cents
0
0
Urea
NH3 +5 cents
40 3/4 cents
+10 cents
+5 cents
UAN28%
NH3 +12 cents
41 cents
+10 1/4 cents
-1 3/4 cents
UAN32%
NH3 +10 cents
41 cents
+10 1/4 cents
+1/4 cent

nitrogen indices chart

 

 

 

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