Fall ammonia applications fell out of favor the past couple years due to cost and environmental considerations. But growers penciling out 2018 costs may move the needle back to anhydrous if market action last week is a guide. The settlement price for August contracts at the Gulf edged below urea last week. Such discounts used to be are, but happened back in January too.
Ammonia fell $45 at the Gulf for settlement of September contracts, taking the index down to just over $172 a ton. The plunge took our projection of fair retail value average price for anhydrous down to just $381. Earlier we advised Corn Belt growers to target sub-$400, a level breeched last week. USDA’s survey in Iowa put the bottom of the market there at $365, with Illinois at $400. Costs at many suppliers officially remain well above that level, keeping our average price around $425. But that should change significantly when fall offer sheets are posted. Some dealers on the Plans are down to $300 to $320, though higher urea costs are starting to firm the market in places. Increased production of nitrogen in the U.S. has the market well-supplied despite international cutbacks, with production expected to recover out of the Caribbean eventually.
Urea has seen some rallies over the past four years. But every time prices firmed, they eventually fell back to make new lows. Costs edged higher again last week at the Gulf, with no indication this is anything more than a rebound in the ongoing bear market. Gulf swaps for August and September contracts are $6 or so above the current price of $179. That suggests some dealers on the Plains who cut their offers as low as $240 could adjust higher, because fair retail value is around $325 given current wholesale costs. Corn Belt terminals are up $14 to $205, with USDA putting the bottom of the Iowa-Illinois market at $265 to $285 last week. That’s around our current average retail price, though many dealers have not reset offer sheets for a while. The international market is mixed. India filled its recent tender for less than expected, but prices elsewhere also firmed.
UAN appears to be stabilizing as dealers begin to refill supplies. The cost of 32% at the Gulf fell around $5 last week to $122.50, but swaps for August-November firmed to $123.25. Retail prices for 28% were unchanged, but dealers changing offer sheets in July on the Plains were generally around $200 to $210. USDA put the bottom of the market in Illinois at $201, so there are also some deals out there for Corn Belt growers.
Phosphates remain quiet on both retail and wholesale markets, with plenty of offers around for tenders globally. The price of DAP at the Gulf edged $1.50 higher to $319, with swaps for December down to $303. Those prices suggest our average of $424 is a decent enough price for DAP, though some offers on the Plains are down around the $415 to $420 range.
Potash prices stayed firm in July, edging higher internationally as big buyers like China and India signed deals to set the pace for the market. USDA reported a sharp jump in Iowa prices, but that appears to be an outlier. Costs at the Gulf are around $215, with Corn Belt terminals at $250, both up $4 to $5 from July lows. Fair value still looks around $300 or less, however.