The NFiles | Headline Chasers Behind the Curve

Posted on 03/06/2018 12:58 PM

 

  • Anhydrous is $6.28 below year-ago pricing -- higher $3.04/st this week at $508.88.
  • Urea is $6.60 above the same time last year -- higher $2.62/st this week at $369.98
  • UAN28% is $19.02 below year-ago -- higher 51 cents/st this week to $230.72.
  • UAN32% is priced $12.27 below last year -- higher $6.00/st this week at $266.65.

UAN32% led gains in the nitrogen segment with Kansas up $4.61 and Nebraska $2.27 higher on the week. SixUAN states were unchanged and no state posted a price decline.

Anhydrous ammonia firmed on a $23.47 rise in Minnesota and a $9.79 per short ton gain in Iowa as Missouri firmed $1.78.Six states were unchanged. Once again, no state posted a lower NH3 price this week.

Urea was higher as South Dakota gained $35.99, accounting for nearly all of the price support in urea this week. Five states were unchanged as Nebraska fell $2.61, Kansas softened $1.98 and North Dakota dropped $1.29.

UAN28% posted just slight gains this week with Nebraska up $4.75 and Kansas firmed $1.91. Seven states were unchanged as South Dakota fell $1.36.

We have long been skeptical of so called "news" from investment service providers. This week, an article is circulating that suggests a looming crop shortfall in South America could increase profits for farmers there. The article believes that will equate to South American farmers being more willing to pay higher prices for fertilizer, prompting the firm to upgrade its guidance on various fertilizer production corporations.urea chart

I would take this opportunity to advise caution when consuming news served up by firms looking to attract investors. The article in question consists of four bullet points which say after meetings with South American ag experts, they have collected "game changing agricultural data." Crop concerns in South America should come as no surprise to Pro Farmer members as we and other ag market watchers have been keenly watching South American weather and ongoing crop production concerns for quite some time.

The first thing we should point out is that South America should not be lumped together when it comes to crop conditions. Crop forecasters believe declines in the Argentine soybean crop will be offset by gains in Brazil. While it would make life a lot more simple, making blanket statements about South American production is akin to ignoring Indiana's recent flooding, saying North American production will suffer crop losses because of drought and intense dryness in Kansas.

While I understand this firm's business is to attract investment dollars, that very fact makes it prudent to take theanhydrous forecast with a grain of salt. Having said that, the fertilizer industry is looking for fertilizer prices to find a catalyst for higher realized prices. Recent strength in December corn futures is more than enough to urge U.S. fertilizer prices higher heading into spring applications. While what i just wrote is not far from what the investment firm said, there is a key difference. Put simply, December futures ARE higher. That we can hold on to. That we can use to manage risk.

I guess my point in all of this is to reiterate the prudence of caution when investment firms dabble in world crop fundamentals. Argentine crop problems are not a surprise, and many actually believe those production shortfalls may already be factored in to futures. Ironically, however clumsy the logic behind the firm's forecast, we agree that fertilizer prices are headed higher. The proof is in our advice from a few weeks ago advising farmers to finish booking fertilizer for spring and summer applications.

So when you see terms like "game changer" and forecasts for better returns to shareholders, take heart if you have already taken action and managed production risk by making fertilizer purchases at price points that will work for your operation. That just means you are ahead of the curve. Stick with your plan, keep an eye on your production budget and stay tuned to your Inputs Monitor and Pro Farmer for news you can trust.

Click here to view the article we have referenced...

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 $644.30 with the eNCR17/NH3 spread at -135.42 with anhydrous ammonia priced at a discount to expected new-crop revenue. The spread widened 8.85 points on the week.


Nitrogen pricing by pound of N 3/6/18

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.30 3/4
$0.41
$0.41
$0.41 1/2
Year-ago
$0.31 1/2
$0.40 1/2
$0.45
$0.43 1/2

The Margins by lb/N -- UAN32% is at a 3/4 cent premium to NH3. Urea is 5 1/4 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
41 cents
+10 1/4 cents
+5 1/4 cents
UAN28%
NH3 +12 cents
41 cents
+10 1/4 cents
-1 3/4 cents
UAN32%
NH3 +10 cents
41 1/2 cents
+10 3/4 cents
+3/4 cent

nitrogen indices chart

 

 

 

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