Lure of higher crop prices offset by concerns about weather.
Holidays around the world – from Mardi Gras to Lunar New Year and Presidents Day – kept international fertilizer markets slow last week. But buying in the U.S. also remains fairly slow as growers mull prospects for higher crop prices with drought creeping across the country.
Ammonia costs are up nearly $5 a ton on retail markets since the beginning of February, with our average price at $482. That’s right in line with fair price projections based on historical price relationships, considering the Gulf index settlement price of $340. Dealer offer sheets ranged from around $440 to $540, with more upside pressure likely on retail prices if dealers stay reluctant to book new inventory. Ammonia likely will follow urea on the international market, which should keep the market from retrenching much.
Urea ratcheted higher last week, though both retail and wholesale markets traded in narrow bands so far in 2018. While supplies are increasing in the U.S., global demand appears to be firm, sending some of the increased domestic production into the international market. Supply chain issues could also emerge if flooding causes problems near the river system. But the direction of prices may depend on the big dogs in the market. Prices could take another leg higher into spring if new demand emerges from India, while global supplies depend on whether China increases production that was cut to control pollution during the winter. Whether any of those developments occurs in time to affect U.S. retail prices remains uncertain, though U.S. urea continues to look cheap by international standards. Retail prices rose around $1 a ton last week to $345.50, though trade was mixed. USDA reported a $4 decrease in Iowa to $367, but new offer sheets on the southern Plains were up $6, in the $355-$360 range. Swaps at the Gulf show firm prices through April, which could keep new inventory higher at the retail level this spring.
UAN costs at the retail level haven’t budged since harvest, with our average for 28% still at $213. The quiet tone to the market could break soon because March swaps for 32% at the Gulf settled nearly $20 higher than February. That could take retail prices all the way to $260 for 28% if historical price relationships hold. The market may be anticipating more demand for spoon-fed nitrogen this spring, after a slow application season last fall.
Phosphates also crept higher last week, reflecting the firm tone to the nitrogen market. After moving higher over the fall, DAP costs held mostly steady, though the Gulf jumped $4.50 last week to $374.50 a ton. That translates into fair value of $463, $5 above our average retail cost of $458, which was up $1.50 in a market that looks balanced right now. New offer sheets appear to be running in the $455 to $475 range, giving prices an upward bias.
Potash continues to slowly edge higher on wholesale markets, which could tighten retail markets a bit into spring. Costs at the Gulf rose $2 last week to $237 and Midwest terminals were up $1 to $273. While the retail average was unchanged at $323, the wholesale market suggests dealers could raise prices up to $10 if adding to inventory into spring.