Ammonia shoots higher again as urea tries to find bottom.
Surprise may be the sentiment most felt by growers turning their sights to 2018 fertilizer prices. Whether the latest news is a pleasant shock or a nasty one depends on your individual market, especially for what’s turned into volatile nitrogen trade to end the year.
Ammonia shot higher again for December contacts settled at the Gulf, jumping another $36.25 to $313 a short ton. The new benchmark is a full $140 off this summer’s lows, thanks to global supplies that remain somewhat short after feedstocks were diverted to make urea during that nutrient’s big rally. But with urea headed in the other direction, ammonia looks over-priced, though the market may take another month or so to adjust. Still, growers searching for ammonia now are likely to find it more expensive on retail markets, which were more than $13.50 higher last week to $408. Since some dealers haven’t restocked yet after a slow fall application season, retail prices remain all over the map. Dealers on the southwest Plains, who tend to update prices frequently, raised offers this week to $380 to $405. But those further east were close to our projected fair value target of $490 based on wholesale costs. Prices should move lower this winter, though the downside could be limited if urea stabilizes.
Urea dropped again last week though momentum to the downside may be slowing. At least that’s what manufacturers are hoping as they try to convince the trade a bottom is near. Rumors are swirling in the marketplace about China, normally a big exporter, having to import some product due to cutbacks caused by environmental constraints. India, which put the market into a tailspin in November by pulling out of a tender, may be back in the market this month, which could set the tone headed into 2018. Swaps into summer don’t show much movement from current levels, however, at the Gulf, where prices last week fell to $217.50, $32.50 below its October highs. That price suggests a retail cost around $345, which would still be $30 above our current average retail cost. That average gained $1 last week but is still below $316 because some dealers haven’t reset prices recently. Those who have are running between $315 and $345.
UAN remains an island of relative calm in the swirling nitrogen space. The cost of 32% at the Gulf was unchanged at $157.50 while the average retail price of 28% actually eased to $208. Retail costs don’t look too far out of line – they’re about $20 below fair value, though the market isn’t likely to get active soon.
Phosphates became more expensive last week thanks to rising costs for the ammonia component of products, but most of the changes are happening at the wholesale level. The cost of DAP at the Gulf rose $4.50 last week to $353.50, about $35 higher than its fall low. Retail prices also gained, with our average at $435, as retailers updating offer sheets raised them $10 to $30. Swaps don’t show much movement through winter, and the market could be reaching a top if nitrogen stabilizes.
Potash saw only minor changes to prices last week in a market that’s been flat for months. Average retail priced eased $1 to $322, which still looks $20 to $25 too high based on wholesale costs. Those wholesale prices are gaining a little, however, with Corn Belt terminals up $3 last week to $258.