The fertilizer market is one filled with more questions than answers headed into spring. A slow fall season for applications doesn’t look much better with most of the Plains and Midwest unusually wet after a series of winter storms. All that moisture – and more snow melt to come – has traffic on the river system slowed by high water and flooding, with very high barge freight rates hampering any movement of products. Farmers’ cropping choices are also very much in doubt. While USDA held to its forecast for 92 million acres of corn this spring, current futures prices and the government’s own estimates show soybeans losing less money in 2019. So, while international nutrient markets remain weak, retail costs for many products have yet to show much if any pullback. As a result, farmers without assured supplies locked in may be playing chicken unless they’re prepared to make last-minute changes dictated by the market.
Ammonia prices remain the poster child for what can – and often does – go wrong for growers who can’t or won’t lock in supplies. International prices remain very soft with Egypt making a big sale only because it slashed prices. Gulf barges and plants in the region are below $300 a ton, but Midwest plants are quoted up to $200 more, with prepay adding another $45. By contrast, when the market bottomed last summer, the spread between the Gulf and Midwest plants was as little as $35. Plants have little incentive to lower their product to the world price because those supplies are out of position in a market running out of time. That forces dealers in the central Corn Belt to run above $600 on average, and even supplies on the southern Plains are $520 to $580.
Urea appeared to hold steady on retail markets but that trend may not last long. Odds favor lower prices because values from the Gulf up river continue to lose ground. The Gulf lost another $6 last week to $233 and terminals also weakened, with most now between $270 and $295. While our nominal average retail cost stayed at $385, replacement cost looks around $340, with some recent dealer sheets near that level. But while grower costs should come down, increased demand could jumble that dynamic.
UAN faces a similar quandary to urea. It’s early for grower demand except in areas of Texas where farmers are getting back into the field. So little product appears to be moving. The Gulf price of 32% dropped to $175, and some terminals in the western Corn Belt lowered offers $5 to $10. But with few new dealer prices showing up, the average for 28% remains $25 or so above replacement cost. Though the Gulf price is down nearly $55, average retail prices still reflect higher costs from last fall’s rally.
Phosphates showed some cracks in what has been a mostly solid armor at the retail level, and those cracks could expand in coming weeks. There are worries demand could fall due to the weather. Our average retail DAP price dropped $2 last week to $515, but prices look like they should be significantly lower due to falling terminal and wholesale markets. DAP at the Gulf is $70 or more off last fall’s high. Lower expenses for the nitrogen component of products in addition to slack demand could keep the market bearish.
Potash was solid all winter while falling nitrogen cost roiled values of other products. But prices edged a dollar or two lower at the Gulf and Midwest terminals. This was the first break for up river prices, but the Gulf is $8 off last fall’s highs, so a little more weakness could be ahead if growers decide to skimp.- farmprogress.com -