Phosphoric Acid, Phosphates & Fertilizers Experts

Fertilizer Outlook – Ammonia is next shoe to drop in fertilizer market

Ammonia contracts at the Gulf for June settled almost $60 a ton lower at $240, the lowest since costs jumped higher in January. The drop suggests Midwest terminal prices should fall below $400 a ton, taking the average retail price for growers near $450, with little justification for even farmers distant from wholesale markets to pay much more than $500. Our average retail price was already falling last week before the news hit, coming in at $485. Rising U.S. production and a steep decline in urea left the path of least resistance lower. Summer is usually a good time to book ammonia but remember, it’s a buyer’s market.
Urea edged lower on the spot market last week on news India’s latest tender was for less than expected volumes, signaling a strategy of buying more frequently for lesser amounts might be the in the works. Both wholesale and retail prices dropped last week in the U.S., where supplies are plentiful and seasonal demand waning. The average retail cost of $313 appears only slightly above fair value based on the new Gulf price of $162, which was down $4. But swaps continue to show higher prices into summer though contracts through September are still $168.50 or less. Still, the U.S. offering the cheapest prices on the world market right now, so it’s time to book supplies you’ll need for 2018 crops if deals are available. Offer sheets on the southern Plains are $295 to $300, with the Midwest not much higher in some locations.
UAN costs look ready to join the rest of the nitrogen complex in a tailspin. The index for 32% at the Gulf dropped $5 last week to $154, and swaps for end of June settlement are another $9 lower. The forward market bottoms with September at $118.75, which translates into a retail price for 28% below $200, $35 less than the current retail average. As a result it appears growers should be able to lock in the lowest cost for the product since 2010.
Phosphates avoided the downturn in other fertilizers, even though lower nitrogen costs should lower the price of products like DAP. But there doesn’t appear to be a lot of excess supply floating around the U.S. right now, keeping retail prices steady too. The Gulf price of $312.50 translates into an average farmgate DAP expense around $450, so the current average retail cost of $427 seems a little cheap. Swaps into September show only a slight break before prices begin firming again. But sharply higher prices don’t appear likely, with increased capacity coming onto the market from overseas.
Potash prices also appeared firm last week, with wholesale benchmarks moving higher. That helped produce an uptick in our average retail cost to $325. While that still appears maybe $15 to $20 too high compared to wholesale costs. International suppliers proved fairly adept this year at balancing supply and demand, so patience likely will be needed to find any deals.