The NFiles | Upside Risk Building for Nitrogen

Posted on 07/05/2018 4:23 PM

 

  • Anhydrous is $34.35 above year-ago pricing -- off 70 cents/st this week at $523.98.
  • Urea is $34.84 above the same time last year -- up a penny/st this week at $369.53.
  • UAN28% is $17.14 above year-ago -- lower 12 cents/st this week at $255.21.
  • UAN32% is priced $13.45 above last year -- down 4 cents/st this week at $273.97.

Anhydrous ammonia was the downside leader in the nitrogen segment this week. Ohio was our only decliner, nh3falling $11.48 on the week. Nine states were unchanged as Kansas added $2.06 and Illinois firmed a dollar.

UAN28% was lower on the week with Minnesota off $8.30. Eight states were unchanged as Kansas added $5.90, Ohio firmed 54 cents and Michigan gained 44 cents.

UAN32% was slightly lower with only Kansas posting a weekly price change... off 41 cents.

Urea gained just a penny per short ton overall this week with Iowa up $1.69, Michigan 70 cents higher and Minnesota firming 43 cents.

With so many states unchanged this week and sidedress season wrapping up, it is likely dealers are resetting prices after having refilled. That means the next few weeks will be telling as to when we need to get fall and spring 2019 nutrient booked. If prices look to shoot dramatically higher, we would do well to book sooner rather than later. A reader emailed me today reporting bids in Northern Iowa around $400. I would consider that a good deal regardless of this summer's price action as we do believe the downside is limited.urea

The greatest risk appears to be in the nitrogen segment with the push-pull in supplies and distribution in the northern plains. Some dealers were left with a surplus as time ran out to refill. Some came up short on supplies during crucial periods, adding support most notably in the Dakotas.

Wholesale ammonia prices rose last week which will boost production costs for some units. Excessive rains in some areas also led to very high demand for nitrogen post-emerge. And the influence of WTI crude oil futures should not be thrown out as at least a contributing factor to upside risk for nitrogen. throw in the possibility of a rise in corn acreage for the 2019 crop year, and we expect steady to moderately higher prices between now and this time next year.

December 2018 corn closed at $3.71 on Friday June 29. That places expected new-crop revenue (eNCR) per acre based on Dec '18 futures at $598.40 with the eNCR18/NH3 spread at -74.42 with anhydrous ammonia priced at a discount to expected new-crop revenue. The spread narrowed 1.00 points on the week.


Nitrogen pricing by pound of N 7/5/18

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.32 1/4
$0.41
$0.45 1/2
$0.42 1/2
Year-ago
$0.29 3/4
$0.37 1/2
$0.42 1/4
$0.41

The Margins by lb/N -- UAN28% is at a 1 1/4 cent premium to NH3 this week. UAN32% is at a 1/4 cent premium to anhydrous ammonia. Urea holds a 3 3/4 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 1/4 cents
0
0
Urea
NH3 +5 cents
41 cents
+8 3/4 cents
+3 3/4 cents
UAN28%
NH3 +12 cents
45 1/2 cents
+13 1/4 cents
+1 1/4 cent
UAN32%
NH3 +10 cents
42 1/2 cents
+10 1/4 cents
+1/4 cent

nitrogen indices chart

 

 

 

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