Murphy’s Law is alive and well in the fertilizer market. A wet fall and late harvest compounded by blizzards and floods lasting into spring is a reminder that if something can go wrong in the supply chain at just the worst time it probably will. “A bird in the hand is worth two in the bush” has never been more true. Growers with on-farm storage who bought last summer on seasonal lows have the products they need to get going when weather permits. Other producers will be either rolling the dice or paying expensive pre-pay charges.
Ammonia could be the odd man odd in the nitrogen trade this spring. Lack of fall applications in many areas and a slow start to spring mean some growers won’t have time to put down the product they want. Ironically, lack of demand could ultimately lead to lower prices at the retail level that better reflect the big drop in prices from fall highs at the wholesale level. Even if that happens it may be too little and too late for farmers forced to switch products or plant other crops. Plants at the Gulf are close to the official contract price there of $254, which is $65 off those fall highs. Terminal charges and retail prices retreated very little by contrast, leaving average offer sheets swelled by prepay premiums $120 over the theoretical replacement price of $458 if that out-of-position product could be teleported to Midwest dealers. It can’t be, and that has farmers facing $600+ Corn Belt charges.
Urea could be the product of choice for those needing nitrogen for planting. That prospect, coupled with expectations India will put out another big tender this week, have the international market showing signs of a bottom. Wet conditions affected not only the timing of applications; they disrupted traffic on the river system, limiting shipments up river just as they’re needed. At the same time the number of barges being unloaded at the Gulf hit the lowest level since June 2017 last week, limiting the supply of empties. That pulled urea barges up $16 last week, with the higher costs flowing upriver and spreading to the interior, too. Even with the increases, replacement prices look like they should bring average retail charges, which have not reset much, down $35 to around $350. Many offer sheets are still suck around $400, with our average round $385.
UAN isn’t in demand yet, which has the wholesale market continuing to backtrack catching up with the previous drop in urea. Spring swaps for 32% at the Gulf run around $175, which translates into a cost for 28% around $240, giving the retail market potential to pull back too from average offer sheets around $25 higher. The lull may not last if more growers switch to later applications to save money or cope with a short planting window.
Phosphates were quiet last week, with the slow start to fieldwork giving the market time to mull Mosaic’s announcement of production cuts. Prices were little changed at retail and wholesale markets though purchases at the Gulf did increase the price of DAP there to $335. The Gulf is off $80 from fall highs but retail prices are flat by comparison, so offer sheets should come down. There probably isn’t time for the market to break the $100 indicated by our pricing model, so costs could stay near $500.
Potash was little changed on retail offer sheets last week with interest muted by the slow spring. Costs at the Gulf eased $2 to $281, and Midwest terminals are $40 higher. That should keep costs for those interested in buying at our current average of $380 or higher. There’s plenty of supply around, however, so the market looks likely to tip at some point, though likely not until later in the spring into summer. - farmprogress.com -