Fertilizing wheat with NPK oticki/ThinkstockPhotos

Fertilizer Review - Risk lurks in fertilizer market

Retail prices head higher as warm weather accelerates demand.

Very warm February temperatures could put growers into the field early this spring, helping compress demand for fertilizer just as retailers raise prices in response to early price hikes up the supply chain on international markets. Costs for N, P and K rose last week and may have more hikes ahead.

Ammonia prices jumped $11.65 on average to nearly $465.50 at retailers, and growers in the central Midwest can expect to pay more than that. New offer sheets on the southwest Plains closer to plants are running around $485 to $490, and generally come in around $50 to $100 less than further east. USDA put the average price last week in Illinois at $513, though Iowa was only at $488. With the Gulf index at $290.25, fair retail value is around $555, so there’s still risk in the market of higher costs depending on how many corn acres growers work into budgets this spring.

Urea is still firm at the farmgate, but wholesale costs globally are in retreat. Retail prices for growers edged almost $2 higher to $346.25. Updated offer sheets on the southwest Plains are around $350 to $370, while USDA put the average cost in Iowa last week at $363, with Illinois coming in around $359. River terminal costs are dropping, however, and the index at the Gulf dropped $10 to $236.50. That still suggests a fair value of $386, so more retail price hikes could be in the works depending on how fast the international market retreats. Swaps for fall are $25 to $30 lower than the nearby at the Gulf. China, which withdrew from the export arena this winter to help trigger the rally, is increasing production and may be ready to start selling again this summer. However, China makes urea from coal, much of which comes from North Korea. The government banned imports from its controversial neighbor last week.

UAN jumped $9 a ton to an retail average of just under $230 for 28%, with some big increases noted on updated offer sheets. New prices on the southwest Plain came in around $245 to $250, with Iowa at $242.50 and Illinois at almost $240, according to USDA. Based on the Gulf index for 32%, which settled at $185.75 Friday, fair value is $267 to $271, leaving some upside risk if growers switch all-out to in-season applications.

Phosphates could still be headed higher, at least in the short term. The index for DAP at the Gulf was up $14.50 to $336.50, around $45 above where it stood in December. Retail prices, by contrast, have only begun to creep higher, and our farm value formula shows upside risk to $495. The current retail average is around $420, putting risk to the upside. China has raised prices and imports coming into the U.S. out of the Middle East were delayed by storms. Swaps show prices starting to ease in April, but not in time for the growing season.

 

Potash prices posted gains on both the wholesale and retail level, as international inventories remain a big tight, leaving the path of least resistance higher. Our average retail prices are up around $2.50 to $314, with recently updated offer sheets between $300 and $335. Gulf costs were higher last week to around $220, with Corn Belt terminal wholesale prices around $253. Fair value still looks like it has upside to $355 at dealers doing some late restocking.

More from Farm Futures:
Weekly Corn Review
Weekly Soybean Review
Weekly Wheat Review

Click on the link below to download additional charts.

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.

 

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