Futures markets trading near contract lows make acreage choices for the year ahead hard to figure. Fertilizer prices could wind up the deciding factor in some areas as suppliers start to make deals for fall, with different products headed in different directions.
Ammonia may be a tough purchase for growers facing corn prices well below break-even. Our retail average was flat last week, staying at the same level as farmers paid this spring. But ammonia could be a buying opportunity for those able to act soon. Wholesale prices are already starting to hint at cost increases, driving by a global market that saw higher costs last week out of the Middle East and Black Sea. Some of those foreign plants are down seasonally and others offline for “unscheduled maintenance,” forcing buyers to bid up prices. Prices in the U.S. typically follow suit; if they don’t, producers may be lured to export the product overseas. Terminal costs in the U.S. rose a couple of bucks a ton last week. Our projected average price based on the wholesale market is up to $403, and could be headed higher if current trends hold.
Urea could offer a ray of hope to growers that higher nitrogen bills do have some limits. After chugging more than $50 higher at the Gulf this summer, the market finally cooled off a bit last week. The Gulf was $8.50 lower to $247, but that good news didn’t travel far. Upriver prices rose, catching up with previous price hikes at the Gulf. Our average retail cost also was up, gaining around $2 to $348, and actual increases are higher, around $20, as retailers reset prices. Our average replacement cost based on the current market is around $390, though swaps don’t show that expense rising into fall.
UAN was the bright spot of the market. Wholesale costs dropped even more than we expected, opening the way for producers who move fast to pick up 28% at $200 or maybe a little less. Whether a good price is available may depend on whether your supplier was quick enough to lock in some inventory; otherwise swaps suggest product more in the $220 to $225 range. Some dealers actually raised prices last week, suggesting relative bargains may be tough in some areas.
Phosphates continueratchet higher, with both retail and wholesale prices gaining a little last week. Our current average DAP price was $1 higher to $492, which is still a little below replacement cost based on Gulf expenses that were up $2 to $403. While growers appear to be balking at paying up for phosphates, a firm global market could keep prices from pulling back much, despite their steady rise over the past year.
Potash likely will provide some minor sticker shock for growers buying this summer. Big international buyers like India are expected to close deals at higher values and U.S. wholesale costs are $20 above spring lows. With the Midwest terminal price last week at $283, growers can expect to pay on average around $375. A few dealers are already posting higher costs, which added $2 to our average price last week, taking it to $347. Expect more to come. - farmfutures.com -