Both global and local factors appear to be driving fertilizer markets as January ends. While farmers in the U.S. mull acreage shifts, signs of potential demand from India are also keeping the market choppy after the recent run u in prices.
Ammonia costs dropped for February contracts at the Gulf, with the settlement index down $13.60 to just over $308. That benchmark translates into an average retail cost of $481, close to our average last week of $473. Dealers reworking offer sheets continue to mostly raise prices, reflective the big jump in wholesale costs since the market bottomed last summer $135 or more cheaper. U.S. production continues to increase, but some of that is being exported or converted into urea, which enjoyed strong margins this fall and winter. Spring demand may be the deciding factor for now, especially if growers cut back on corn, which doesn’t pencil out as well as soybeans for most.
Urea was looking like it had peaked, but bounced back last week to continue its consolidation at higher price levels. The Gulf index ticked back $3.50 higher to $242.50, and swaps for February settled Friday at $251 as the calendar gets ready to flip. Another big tender in India over the next month or so could signal whether the market has topped out or not. For now, our average retail price of $343 looks cheap compared to the potential replacement cost, which suggest March could hit $400. Most dealers resetting prices recently aren’t near that; USDA put the average in Illinois at $371 last week, though the top of the market there was $421, with updated offers elsewhere mostly around $350.
UAN remains the quiet sector of the nitrogen complex, with lack of farmer buying keeping the retail market a backwater. Our average cost for 28% was just a quarter higher at $212.65, a price that looks a little cheap compared to the Gulf 32% index of $171.50. Swaps for February and March are a few dollars higher, suggesting retail costs more in the $240 to $250 level.
Phosphates were also mostly flat last week, as the nitrogen cost of products settles down. Our average retail price for DAP was just a few cents higher at $453. Swaps for February at the Gulf settled Friday at $356, which translates into retail costs around $10 cheaper than the retail average right now, which has moved to its highest level since the spring of 2016.
Potash is up some 40% off multi-year lows hit last fall on the wholesale market. The Gulf price was steady last week at $235, with Midwest terminals also flat at $267. Our average retail cost crept a little higher to $331, and could increase a little more if wholesale costs stay strong. Canadian companies cut production this winter to balance supplies and the tactic appears to have worked: Their exporting cartel is reportedly having trouble keeping up with international demand headed into spring.