While dealer price sheets for fertilizer edged mostly higher last week, more signs of a potential top also emerged last week as international urea prices softened. That could be the start of a little seasonal weakness that could finally pave the way for modest winter buying opportunities.
Ammonia costs moved higher in January, with retail prices up around $13 since the first of the year. Our average stands at $473, which still looks a little cheap compared to the January contract settlement at the Gulf. Fundamentals also point to potential for higher spring costs. While global production was down in 2017, most of the drop occurred in China. Elsewhere new supplies continue to come onto the market, which could keep buyers from pushing prices higher. While some of that capacity is in the U.S., not all the new product is staying here. Exports more than doubled last year while imports dropped. Supply chain breakdowns could spark rallies into spring but higher costs convince growers to cut back corn production, too. Ultimately, ammonia should follow urea, which has started to weaken.
Urea edged lower last week on both retail and wholesale markets, though the declines were modest. The index at the Gulf lost around $3.50 to $239, which was matched at the retail level. Our average retail price last week was at $335.50, which still looks about $40 undervalued by historical standards and current fundamentals. Swaps are a little higher into March, but the market likely will follow trends on international markets. China continued to cut production this winter as natural gas was diverted to heating needs, but the market’s direction could follow large importer India, which may not be back to buy until March. The global urea market is expected to have a growing surplus in 2018. U.S. exports likely doubled in 2017 while imports dropped.
UAN ticked higher last week on both retail and wholesale markets, but so far few changes have been seen on dealer offer sheets. That suggests the current average retail price of $213 for 28% could be undervalued. The Gulf cost for 32% is at $171.50, which translates to a retail cost of $240 to $245 with the swaps market firm into summer.
Phosphates broke on both wholesale and retail markets last week, reflecting a weaker tone in the nitrogen component and ideas that phosphate supplies are growing significantly globally. The average retail price for DAP edged below $450 while the Gulf was down $5.75 at $357.50. While retail prices are undervalued a little by historical standards, fundamentals don’t suggest rising costs now. And swaps show a weaker tone into summer after the recent rally.
Potash firmed last week in a market that’s shown little variation in the past year. The average retail cost is at $331, which looks fairly valued compared to wholesale costs. The Gulf price edge $2 higher to $235 though the Corn Belt terminal price was steady, staying at $267. While global mine capacity continues to grow, companies have proved nimble at cutting production when supplies mount.
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Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Adviser. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.