Swaps suggest this summer’s break may be limited.
With the planting window for corn starting to close, retail fertilizer prices appeared little changed last week. But signs emerged the nitrogen market could be make a bottom, limiting seasonal weakness into summer.
Ammonia prices were quiet in the U.S. last week but costs out of the Black Sea edged higher again. That suggests June contracts at the Gulf could be settled steady to higher after breaking $75 from this winter’s highs through May. Though farmers have barely finished 2018 applications they should be aggressively looking for dealers willing to commit on inventory they’ll need for the 2019 crop. The May Gulf index of just over $231 translates into a retail cost for replacement supplies between $365 to $420 – compared to the average of just under $500 growers paid recently.
Urea offered a few more clues of a turnaround in nitrogen. While Gulf spot prices ended the week down $6.50 at $201.50, swaps for June settled up $12.50 at $214. That optimism came despite more signs of rising imports that will face competition from increased domestic supplies. But global markets are still dealing with lack of supplies out of China, which cut manufacturing as part of the government’s bid to curtail pollution and ease natural gas shortages during the winter. Current average retail costs around $350 look like they have $20 downside into summer unless growers can find dealers with leftover inventory.
UAN was unchanged on the retail level for 28% last week but wholesale costs continue to drift lower. The Gulf index for 32% slipped $1.50 to $170, which suggests the retail market is fairly valued at present. Look for costs to fall into summer and perhaps into the fall, with swaps up to $20 lower. Still, the market’s current bottom is projected at $215, $15 more than earlier this spring before crop prices showed signs of a long-term turnaround.
Phosphates only seemed to go in one direction this year: up. But while DAP was unchanged at the retail level, wholesale costs retreated. The Gulf price fell another $9.50 last week and at $374 is less than $15 off this spring’s highs. Swaps out to fall don’t show much change either. While retail average prices this spring approached $490, only a modest reduction to $465 seems likely this summer unless market dynamic change.
Potash also showed signs of holding firm, which could limit buying opportunities over the summer. The Gulf cost was up $2 to $242, though Midwest terminals and retail prices were steady. Our current average retail price of $345 actually looks less than replacement cost right now, as cutbacks by Canadian companies appear to have worked.