Market and product

Ammonia costs continue to make new lows on international markets, with the Gulf index for July swaps tumbling $27 to $258.50, its cheapest level since the depths of the financial crisis in 2009.Retail costs were little changed as fewer dealers adjusted prices with the end of the planting season. But dealers trying to get rid of inventory or willing to restock now should be making attractive offers. Retail costs in the Corn Belt typically run around $200 over the Gulf, and our projected fair value is around $460 at current price levels. That compares to the current average retail price of $528. Growers on the southern Plains close to plants could see costs at $400 or less.

Urea prices are trying to show some stability after posting multi-year lows, with the vote in England complicating the outlook to be sure. A surging dollar raises costs in many parts of the world, draining purchasing power and demand. More supply is coming on line in the U.S. and Chinese plants may also be selling again after focusing on domestic sales due to low international prices. Yet costs out of the Gulf firmed $6.50 this week and swaps through the summer and into the fall show prices eventually rising another $10. The current benchmark of $182 translates to a fair value retail cost around $325, $25 below the average retail cost. Some dealers on the Plains are already below $300, so there could be large regional price differences.

UAN prices continue to edge lower as applications wind down. The index for 32% at the Gulf dropped $5 this week to $162.50, and swaps for July are $25 cheaper. Growers looking to lock in costs this summer should target the $210 to $215 level for 28%.

Phosphates continue to show signs of stability but there’s no indication that prices are ready to rise quickly. DAP at the Gulf rose $2.50 this week to $346.50, with average retail prices also moving a little higher. Swaps contracts through fall are flat, suggesting a fair price around $435 at the retail level, $30 to $35 below current retail costs. Global supplies remain plentiful with supply disruptions the most likely source of risk right now.

Potash prices have been the weak link of the fertilizer industry during its downturn, causing Canadian producers to cut back production. Now the event that helped trigger the selloff could be about to change. There are signs Belarus and Russia may consider reforming their joint marketing effort, which could put the cartel system back firming in control of supply. On the demand side India may begin buying again, further stabilizing prices is China gets back in too.

Growers should be looking to lock in costs between $300 and $340, depending on distance from the terminal.