A bearish tone in commodities generally – and a downturn in price prices specifically – should keep fertilizer costs subdued headed into summer. Urea offers the best potential for locking in some costs for 2018, but only if the price is right.
Ammonia likely will move lower in June, as that part of the nitrogen market catches up to the downturn in urea globally. Prices were fairly steady in May around the world, thanks to lower sales out of Ukraine and the Caribbean. While few dealers appeared to be changing prices yet, average retail prices slipped $1 to $492. The market doesn’t appear overpriced – the average is about $15 under fair value based on current costs at the Gulf, where June contracts could settle lower. Offer sheets updated in May on the Plains ran between $430 to $480, with prices in the central Corn Belt more at the $510 level, according to USDA’s survey in Iowa and Illinois last week.
Urea is a market with two tracks. In the U.S., prices are cheap as new production capacity comes on line. Costs around the world are up to $30 a ton higher as traders wait for news on the latest big tender from India. If that deal sputters, the international market could retreat, but for now urea could be at a buying point for growers wanting to lock in some of their 2018 costs. Swaps through summer are pretty much flat, in line with the current Gulf cost of $166, which translates to around $310 at the retail level, with Midwest terminals slipping to $208 last week. Average retail costs were little changed last week at $317. But offer sheets as usual are cheaper on the Plains, where updates in May were in the $290 to $300 range.
UAN costs slipped a little last week at the retail level, but the current average for 28% of $230.50 looks certain to be lower this summer. Prices for 32% at the Gulf look ready to end May around $159, with June contracts almost $15 cheaper and September down to $122.50. That should take 28% to $200 or less eventually.
Phosphates showed a little strength last week, at least at the wholesale level. Farmers in the U.S. may not be buying, but those in South Asia and South America are. That was reflected in firmer costs for DAP at the Gulf around $312.50, a benchmark that’s cheap by world standards. The retail average for DAP was mostly steady around $427, with prices generally ranging from $405 to $440. Those retail charges look fairly priced with little change shown in the swaps market into the fall.
Potash was another quiet market last week, though the international market may be firming a little. Retail prices average around $324, around $20 higher than typical fair value given a terminal price of $252, which was $2 lower. Manufacturers are trying to talk up a balance between supply and demand; if they’re right, prices may not have much downside.. - farmfutures.com -