Nitrogen market shows few signs of easing.
With profits slim in 2017, fewer growers may be inclined to prepay expenses before year-end to minimize tax bills. That may be a good thing because nutrient costs are still rising for growers trying to book supplies.
Ammonia costs on the southwest Plains are normally cheaper than those further east in the Corn Belt. But dealers are also more sensitive to price changes, reworking offer sheets quickly to reflect what’s going on in the international marketplace. So, while Midwest costs were steady to only a little higher last week, charges to the southwest soared, reflecting more of the surge in prices seen lately. Dealers in Kansas and Oklahoma updating last week jumped their prices $55 to $60 a ton, with those now running $435 to $480. By contrast, USDA’s survey of dealers in Iowa and Illinois put carried averages of $377 and $418. Our pricing model puts the fair value for ammonia currently at an average of $490 following a jump in December contracts at the Gulf, where the index is $140 off August lows. Costs normally pull back in winter, but the extent of any drop could depend on what happens with the rest of the volatile nitrogen complex.
Urea showed signs of stabilizing last week, when better demand emerged internationally to give sellers more room to firm prices. Costs at the Gulf were up $6 to $223.50. The rest of the international market was mixed, with Middle East values higher and those out of the Black Sea easing. Swaps for January are another $11 higher, which could take retail costs as high as $370, some $55 higher than the current average of $316. Dealers were quiet last week, however, with recently updated offers at $315 to $345 on the Plains.
UAN continues to digest recent price gains in the nitrogen complex with a mixed tone last week. Retail prices were little changed but the cost of 32% at the Gulf settled $1.50 higher at $159. Swaps into spring are another $7.50 higher, suggesting 28% could run $230 at the retail level ahead of the growing season, more than $20 higher than the current average. That could set up retail prices similar action as last year, when costs bottomed in December then rose $20 through March.
Phosphates rose last week thanks to the increasing cost of the nitrogen component of compounds. While USDA put the average cost of DAP up $6.25 in Illinois to $437.62 updated offer sheets in December on the Plains are running $445 to $465. Current wholesale prices are fairly steady into spring, but translate into costs around $470 if demand holds up and nitrogen costs don’t ease.
Potash remains quiet, limiting downside price pressure. Midwest terminal costs were $2 higher at $260 last week despite steady values at the Gulf. Retail prices eased $1 to $322, close to fair value based on past trends.