Anhydrous Urges Nitrogen Segment Higher

• Anhydrous ammonia is $599.62 above year-ago pricing -- higher $113.05/st this week at $1,355.00.
• Urea is $298.33 above the same time last year -- unchanged on the week week at $861.67.
• UAN28% is $228.92 above year-ago -- unchanged on the week at $591.75.
• UAN32% is priced $229.75 above last year -- unchanged on the week at $628.50.

Nitrogen prices were mostly unchanged in USDA's most recent report, with the exception of a $113.05/st rise in anhydrous ammonia. Local farmers in northeastern Iowa have brought it to my attention that their preferred suppliers are not offering bids on some products and USDA's data for the week ended September 20 tells the same story. USDA reported no change in UAN28%, UAN32% or urea during the two-week reporting period suggesting their survey found dealers either reporting the previous survey's price, or giving no bid at all. Either way, the implication is retailers are unsure where to set those prices in the best case scenario, and in the worst case, currently unable to resupply. The second table below reveals UAN solutions and urea are overpriced by the pound of N compared to anhydrous ammonia which may indicate prices on those products are due to correct lower. But the aggressive upward move in NH3 implies anhydrous wants to firm to close the gap.

The most likely scenario is that dealers are waiting for bids from wholesalers before they get too far out over their skis. Nitrogen prices, on average, do appear to have confirmed the seasonal price floor although, since only anhydrous moved - however aggressively - we can only speculate that the entire nitrogen segment is set to continue higher. We believe it is. If the current relationship between expected new-crop corn revenue (eNCR) and nitrogen prices persists, margins for the 2023 crop will narrow sharply.

December 2023 corn closed at $6.76 on Monday, October 3. That places expected new-crop revenue (eNCR) per acre based on Dec '23 futures at $1,127.89 with the eNCR/NH3 spread at -227.11 with expected new-crop revenue coming in well below the price of one ton of anhydrous. In order to correct the spread and bring NH3 and new-crop revenue to parity, December '23 corn futures would need to firm well above $7.00, or NH3 would need to soften $227.11 per short ton.

*Analysis based on fertilizer price data released by USDA.