Phosphoric Acid, Phosphates & Fertilizers Experts

Nitrogen tumbles as Plains dealers reset

The summer weather rally in the grain markets is giving growers a chance to start locking in prices on 2018 crops – if they can fix production costs like fertilizer to increase odds of a profit. While Midwest dealers don’t appear to doing much yet, retailers on the Plains are adjusting prices sharply lower as they prepare offer sheets for growers starting to eye applications.

Ammonia continues to have a soft tone internationally after benchmark prices reset lower in July. Manufacturers overseas are cutting production, which could eventually offset some of the increased output taking place in the U.S. But for now, it’s a buyers’ market and dealers are slashing prices from spring levels. July offers at some Plains dealers plunged as low as $285 to $300, compared to the Gulf index contract price of $217.50. That’s taken our average retail price down to $435, just $10 or so above fair value based on the wholesale market. USDA’s survey of prices in Illinois and Iowa last week showed no change, with prices still at spring levels around $480 to $500. So those dealers should be joining the price-cutting party when they begin restocking, perhaps taking some offers below $400.

Urea continues to show signs of trying to stabilize after a big tumble this spring on global markets. In the U.S. the Gulf price firmed $1 to $161 as excess supply was so cheap it was exported to other countries looking for bargains. Retail costs typically lag the pace of moves at the wholesale level, so dealers are still resetting prices lower as they post new offers. Our retail average dipped to just $289.50, anchored by some on the Plains as cheap as $250. Those prices look very good in light of the swaps market, which still shows the Gulf adding $15 by fall.

UAN was fairly quiet at the start of July in contrast to the rest of the nitrogen complex. The Gulf index was steady at $127.50 for 32% but the swaps market is lower to $120.50 for August. Retail prices have begun to move lower as dealers reset offer sheets, dropping our average for 28% to $221.50. That’s still $20 above our projection of fair value, so farmers still should be bargaining tough for deals. Some Plains costs are down to $202 to $205 already.

Phosphates were flat to start July as the market waits for results of a series of international tenders for direction. Big price moves globally don’t look in the cards, and U.S. prices may also stay relatively calm after retail DAP traded in a $10 range for the past five months. Still, growers should be looking hard for deals because when retail prices reset, they could be higher. Our average retail price for DAP is $423.50, while fair value based on wholesale costs is $20 higher than that.

Potash prices edged slightly higher last week, with a $1 bump at terminals working up the supply chain to the retail level. Our average current retail cost of $326 is about $25 above fair value based on the terminal charge of $251, so patience may be needed to find a good deal.