Corn growers who scrambled to secure leftover ammonia supplies from dealers after a slow fall application season should find out in coming months whether a bird in hand costs less. Spring pre-pay prices put out by manufactures in December suggest it likely will.
Ammonia on wholesale markets slumped as 2018 ended, following the early winter downturn globally for urea. Weak demand in the U.S. caused by very slow fall applications left dealers facing a tough choice if they had anhydrous leftover: Sell it to manage risk from further losses in nitrogen, or wait for growers to start buying in the spring. While retail ammonia on the spot market could be had for less than $500, a rush to secure ammonia for spring prompted manufacturers to raise pre-pay costs $50 or more – and any disruptions at plants or on the transportation system could cause prices to jump even more when farmers take to the fields. Dealers posting spring prices in December were generally in the $575 to $635 range. Even dealers on the southwest Plains closer to plants were running $515 to $520, which could be enough to discourage some farmers from corn, especially if they didn’t get fields ready in the fall.
Urea, by contrast, continued to weaken as 2018 ended, with swaps at the Gulf ending the year barely above $260, more than $55 off October highs. That move lower came on ideas supplies are increasing worldwide, a mood strengthened when China returned as a seller in the last big tender by India. Suppliers internationally continued to unload supply on the market in year-end activity. Dealers adjusting prices in December mostly cut offers around $20, though our last retail average reading of $391 looked about $20 overvalued. Swaps activity at the end of 2018 showed traders expect higher costs into early spring, with March trading nearly $20 above the spot market.
UAN followed urea lower on the swaps market, but that softness also may not last. Farmers mostly aren’t interested in buying right now, though lack of ammonia applications and a move towards spoon-feeding nitrogen could cause demand to pick up noticeably in the spring. Our average retail 28% cost of $265 reflects offer sheets covered in dust, because wholesale values for 32% at the Gulf jumped $80 off summer lows before retreating $15 in December to $210. Swaps for March closed 2018 at $217, which translates to a replacement cost of around $300 for 28%.
Phosphate products should see a softer tone as dealers post new offer sheets in January. Wholesale costs pulled back in December, taking DAP at the Gulf to $386.50, $40 off the fall high. Terminal expenses also began to retreat a little, and contracts into March at the Gulf don’t show much upward pressure. Retailers haven’t posted a lot of new prices yet, though those who have cut prices. Our last average for DAP was at $515, which looks $35 or so too high based on replacement cost.
Potash prices continue to buck the trend in other fertilizer markets, showing more strength as 2018 ended. Dealers updating offer sheets in December were mostly in the $360 to $390 range, though that could be low based on the latest replacement costs projections. With the Gulf at $291 and Corn Belt terminals averaging $318, average costs could top $400 for some growers.