Phosphoric Acid, Phosphates & Fertilizers Experts

Clocks tick down on nitrogen decision

While a few growers on the southern Plains are getting started with fieldwork, spring seems a distant hope for many farmers in the Midwest and elsewhere. Wet fields, flooded rivers and red ink on income projections could trigger revisions to both cropping and fertilization plans as final choices are made for 2019.

Ammonia remains a tale of two markets. Those lucky enough to buy from plants on the southern Plains are seeing lower prices, thanks to February contract settlement at the Gulf that was unchanged from January at $258.50 a short ton, $63.50 off the fall highs. Those prices suggest ammonia is fairly priced around $465 on average, and some producers closer to the source at the Texas Gulf or nearby plants are likely able to pay as little as $400 or so. But lack of fieldwork last fall has spring prepay prices topping $600 in the Corn Belt as the industry anticipates a rush for supplies that could choke the supply chain. Farmers still hoping to plant corn may wind up switching to other products and application periods, while others may move to soybeans, or other alternatives if available.

Urea could be the swing factor in the nitrogen market. Wholesale prices broke sharply when Indian tenders brought out plenty of sellers, including China, which returned to the scene after cutting exports last year. Traders will be watching to see what China does as markets there reopen after Lunar New Year holidays, amid demand that overall doesn’t seem robust. U.S. retail prices were down more than $3 last week, but at $387 a ton remain around $40 above replacement cost, which keeps getting cheaper. Values at the Gulf moved below $240 a ton at the end of last week and some dealers on the Plains are $350 or less already. Urea imports for November, the most recent data available due to the government shutdown, were up 18% from 2017, though net imports dropped compared to October.

UAN costs for growers could see a reduction from current posted prices, but not by as much as the rest of the complex. That’s because retail values never saw the increases happening up the supply chain when wholesale costs jumped in line with the rally in other nitrogen products. Our current average price for 28% is just above $270 – replacement cost on the spot market is about $10 cheaper, and may not change much based on swaps trade through spring. Contracts at the Gulf are steady to a little higher into May, likely anticipating stronger demand from growers switching products in an attempt to save money or time. The Gulf closed last week at $191 for 32%.

Phosphates are also a market in play based on what happens with nitrogen. The cost of DAP at the Gulf dropped $60 from fall highs due to slow applications and the lower cost of its nitrogen component. But average retail prices haven’t shown any movement, saying around $513, $62 above replacement cost, with swaps for March at the Gulf a little cheaper still.

Potash is the odd man out of the current market. Unlike nitrogen-dependent products, potash didn’t see any reduction in prices at the wholesale level. Instead of breaking during the fall, costs kept steadily rising before plateauing over the winter. The Gulf is at $287, with Midwest terminals put at $325. Those costs mean an average ticket to the farmer of $400.