Composite Claims Premium

Posted on 05/20/2020 7:20 AM

 

Fertilizer prices were mixed and price action was very mild again this week.

A few things jump out as I look at this week's data. First, and rather significantly, our Nutrient Composite nutrient composite index spreadIndex has firmed to a level above expected new-crop revenue for the first time since the first week of May 2019. At that point, corn futures shot higher and fertilizer prices began to soften and new-crop revenue quickly regained its premium to our Composite Index. Looking farther back, we have to go all the way back to May 2016 to find the last time our Composite Index held a premium to new-crop revenue.

While the merging of fertilizer prices and corn prices appears to be a seasonal occurrence, I would point out that for the entirety of the period May 2016 to May 2019, our Composite Index maintained a steep discount to new-crop revenue.

This week the premium our Composite holds to new-crop revenue is slim at just 0.72 point, the outlook for corn prices is demand driven. Until ethanol production resumes in earnest and exporters -- China in particular -- show up to make sizable, sustained purchases, corn futures are likely to remain rangebound. Even with fertilizers priced at a depressed level, and in most cases already applied, profitability will be tight unless something can light a fire under corn prices.

The other item of note is urea. We have been watching wholesale prices slide and retail prices firm. Urea is nh3 urea spreadour highest priced fertilizer when considered on an indexed basis. That does not line up with wholesale price movements. According to MosaicCo., this week, wholesale urea is priced 24.5% below the same week last year. Meanwhile, retail urea is priced 7.8% below year-ago.

The retail urea market is not reflecting the decline in the wholesale price at present, which levers for a pending price drop. The fact that urea is overpriced compared to the rest of the fertilizer segment adds to the downside potential (see NH3/indexed urea price spread chart at right.) While overall fertilizer price action has been very mild in recent weeks, urea will have to buck that trend and fall sharply to correct itself. It is unclear if or when that will happen, but the fundamentals and the technicals both point to lower urea prices ahead.

  • Our Nutrient Composite Index (NCI) firmed 0.02 points to 541.04.
Fertilizer
5/4/20
5/11/20
Change
Current Week
Fertilizer
Anhydrous
$506.80
$506.58
+51 cents
$507.09
Anhydrous
DAP
$422.98
$423.66
+60 cents
$424.26
DAP
MAP
$418.43
$418.74
+95 cents
$419.69
MAP
Potash
$356.99
$356.88
+56 cents
$357.44
Potash
UAN28
$245.07
$245.61
-$1.83
$243.78
UAN28
UAN32
$274.00
$274.04
+27 cents
$274.31
UAN32
Urea
$387.10
$388.09
+14 cents
$388.23
Urea
Composite
540.51
541.02
+0.02
541.04
Composite

Corn Futures

  • December 2020 corn futures closed Friday May 15 at $3.32 putting expected new-crop revenue (eNCR) at $540.32 per acre, off $5.28 on the week.
  • With our Nutrient Composite Index (NCI) at 541.04 this week, the eNCR/NCI spread widened 3.86 points and stands at +0.72.

Nitrogennitrogen indices chart

  • Nitrogen prices were mixed on the week although declines outweighed price gains.
  • Anhydrous ammonia firmed 51 cents with Iowa up $9.81 and Kansas gaining $1.33. Nebraska softened $3.93 as Missouri fell $1.19.
  • UAN32% added 27 cents on the week led by Michigan, which added $3.11 as Kansas rose $1.67. Declines were limited to Wisconsin, off 11 cents per short ton on the week.
  • Urea firmed 14 cents regionally with Michigan up $7.08 and North Dakota gaining $2.24. Missouri led declines falling $5.60 with Iowa softening $3.10.
  • UAN28% was $1.83 lower regionally with Missouri correcting $26.86 lower as Iowa softened $9.69. Michigan led gains adding $6.39 as Indiana firmed $3.38.

Phosphate

  • Phosphates were higher with MAP leading gains.p and k indices chart
  • MAP firmed 95 cents per short ton regionally led by Michigan, up $27.50 and Nebraska firming 82 cents. Missouri softened $7.10 and Iowa fell $3.80.
  • DAP was 60 cents higher regionally with Missouri up $12.50 and Kansas up 45 cents per short ton. Wisconsin fell $2.82 and Michigan softened $2.33.
  • According to MosaicCo., in the week ended May 15, wholesale DAP and MAP were sideways to mostly lower at U.S. terminals.

Potash

  • Potash firmed 56 cents per short ton regionally.
  • Michigan gained $8.50 as Minnesota firmed $1.62. Missouri fell $2.59 and Iowa softened $1.80.
  • During the report week, wholesale potash prices declined at U.S. terminals.

nutrient composite index chart


 

 

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