Inputs Market Update: Urea Continues to Lead to the Upside

Posted on 03/09/2017 10:12 AM

Gains tallied $8.17 to Declines' $6.42 in the regional averages.

inputsmonitor.com"Urea was our upside leader in the fertilizer segment this week firming $4.36. Potash was not far behind, adding $3.11 of its own as UAN32% added 60 cents per short ton. UAN28% fell 5 bucks even to lead declines as anhydrous ammonia fell 79 cents, MAP softened 44 cents and DAP fell 19 cents per short ton.

Farm fuels continued to press higher with diesel up 6 cents per gallon this week and propane 4 cents higher.

Fertilizer prices remain at value levels compared to expected new-crop revenue although potash this week crossed over UAN28% on an indexed basis and is no longer our lowest priced nutrient. inputsmonitor.comMeanwhile, urea continued to widen its premium to the rest of the nitrogen segment. The concern on urea is not so much for corn acres as it is for the cost of producing wheat. In the current climate of low Chicago and Kansas City wheat prices, higher inputs costs will thin profit margins for producers. That may push some acres out of wheat production and over to corn or soybeans. Indeed USDA's January 12 reports supported that notion, projecting US wheat acres to a low not seen in over a century. The bulk of those acres will remain in production but the discount inputs for corn present against inputs for wheat will make the switch from wheat to corn attractive.

Most analysts expect around 92 million acres will go to corn production in the spring, but some estimates are as low as 88 million acres. Until anhydrous ammonia firms to a level comparable with urea's premium, corn acres will continue to look attractive for spring.

inputsmonitor.comIn the week of January 6, 2017 EIA reported a strong uptick in national crude oil, gasoline and distillate supplies. During the same week, however, propane supplies fell below year-ago and through the top end of the five-year average range. Given that demand for home heat is at its seasonal peak, supply features will drive price action. That suggests higher propane prices, especially in periods of frigid temperatures. Farm diesel prices are less certain since distillate prices are tied to heating oil futures, which, like crude oil, have settled into a higher range. We expect farm diesel to level off, but this week's price action has diesel pointed firmly higher.

Corn Futures -- December 2017 corn futures closed Friday, January 13 at $3.86 putting expected new-crop revenue (eNCR) at $617.31 per acre -- firmer $7.47 on the week. With our Nutrient Composite Index (NCI) at 495.97 this week, the eNCR/NCI spread widened 7.42 points and now stands at -121.34. This means one acre of expected new-crop revenue is priced at a 121.34 premium to our Nutrient Composite Index.

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Nutrient/Fuel
1/2/17
1/9/17
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$472.73
$472.14
-79 cents
$471.36
Anhydrous
DAP
$437.42
$437.99
-19 cents
$437.81
DAP
MAP
$439.41
$438.29
-44 cents
$437.85
MAP
Potash
$312.85
$312.59
$3.11
$315.71
Potash
UAN28
$225.47
$225.31
-$5.00
$220.31
UAN28
UAN32
$250.65
$253.21
60 cents
$253.80
UAN32
Urea
$335.50
$334.84
$4.36
$339.20
Urea
Farm Diesel
$1.95
$1.95
6 cents
$2.01
Farm Diesel
LP
$1.19
$1.19
4 cents
$1.23
LP
Composite
495.65
495.92
0.05
495.97
Composite

 

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