The NFiles | Energies May Pull N Lower

Posted on 02/08/2018 11:39 AM

 

  • Anhydrous is $8.36 above year-ago pricing -- higher $3.07/st this week at $498.83.
  • Urea is $5.9 above the same time last year -- higher $6.16/st this week at $361.75.
  • UAN28% is $8.85 below year-ago -- higher $8.09/st this week to $232.94.
  • UAN32% is priced $17.61 below last year -- lower $4.69/st this week at $250.86.NH3 chart

UAN28% led gains in the nitrogen segment this week. Iowa led to the upside gaining $22.18 as Illinois added $22.00 even, and Michigan firmed $13.03. Two states were unchanged as Minnesota fell $15.90 and South Dakota softened 6 cents.

Urea was higher on the week led by Indiana which gained $49.95 as Ohio firmed $30.92. Only Wisconsin was unchanged as North Dakota fell $25.30, Michigan dropped $14.60 and Iowa softened $4.94.

Anhydrous ammonia was higher on a $33.56 rise in Ohio as Kansas gained $14.97 and Nebraska firmed $13.35. Two states were unchanged as Minnesota fell $37.23 and North Dakota fell $3.34.

UAN32% fell on a much needed $108 correction lower in Minnesota as Illinois softened 60 cents per short ton. Five states were unchanged as Nebraska gained $10.29 and Iowa firmed $8.52.uan chart

As we noted in our initial look at this week's price action, despite higher fertilizer prices, corn futures have firmed as well, actually widening the discount our Nutrient Composite Index holds to expected new-crop corn revenue. Many believe the rise in crude oil pricing contributed to recent strength in fertilizers. If that is correct, fertilizer should fall alongside crude oil as March WTI - as of noon CT Thursday - looks to be headed for a run below $60.

If we are headed down the energies route, we must also point out that natural gas has retreated sharply from recent highs which should give fertilizer manufacturers in the U.S. an opportunity to lock in some needs for feedstock natgas. As crude oil and natural gas soften, fertilizer will likely soften as well.

Standing in the way of that, however, are seasonal tendencies. We will soon be right up against early spring urea chartfieldwork preparations which will include, for some farmers, booking fertilizer for spring/summer applications. that demand usually puts a little starch in nitrogen prices, and we expect this year to be no different.

We are 70% booked on spring/summer nitrogen, and if a dip arrives, we will have to be quick to take advantage, and book remaining needs for upcoming applications.

December 2018 corn closed at $3.92 on Friday, February 2. That places expected new-crop revenue (eNCR) per acre based on Dec '18 futures at $623.90 with the eNCR17/NH3 spread at -124.26 with anhydrous ammonia priced at a discount to expected new-crop revenue. The spread widened 10.17 points on the week.


Nitrogen pricing by pound of N 2/7/18

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Midwest Average
$0.30 1/2
$0.40
$0.41 1/4
$0.39
Year-ago
$0.30
$0.39 1/2
$0.43 1/4
$0.41 3/4

The Margins by lb/N -- UAN32% is at a 1 1/2 cent discount to NH3. Urea is 4 1/2 cents above anhydrous ammonia; UAN28% solution is priced 1 1/4 cent below NH3.


Nitrogen
Expected Margin
Current Price by the Pound of N
Actual Margin This Week
Outstanding Spread
Anhydrous Ammonia (NH3)
0
30 1/2 cents
0
0
Urea
NH3 +5 cents
40 cents
+9 1/2 cents
+4 1/2 cents
UAN28%
NH3 +12 cents
41 1/4 cents
+10 3/4 cents
-1 1/4 cent
UAN32%
NH3 +10 cents
39 cents
+8 1/2 cents
-1 1/2 cent

n indexes

 

 

 

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