Tractor with high wheels is spraying fertilizer on young wheat. Leonid Eremeychuk/iStock/GettyImages

Fertilizer Outlook - Summer bargains are scarce

Ammonia costs follow urea higher with UAN set to rise too.

Growers didn’t have long this summer to snap up whatever bargains were available on a fertilizer market that appears to be making a seasonal move into fall. A three-year high in wheat prices coupled with stronger markets for soybeans and corn internationally appear to be turning the mood in the nutrient complex around.

Ammonia typically follows the urea’s direction so it was no surprise August contracts at the Gulf settled $27 higher at $281. This brought prices $50 off May lows. Growers already had only a short window for securing supplies this summer as suppliers appeared reluctant to commit to a lot of volume given uncertainty caused by Chinese tariffs on soybeans. Some retailers have yet to post updated prices, with a wide range of offers on the table. On the southern Plains costs run from $395 to $495 on new price sheets; our current fair value based on replacement cost is $446, right in the middle of that range. Growers in the central Corn Belt looking to buy for fall application likely will pay more, say $410 to $510 or more given current wholesale measurements, though some plants are already raising prices. Still, international prices may be leveling off unless supply chain disruptions upset that applecart. Ammonia exports in June were above year-ago levels while imports fell.

 

 

Urea got a shot in the arm from India’s decision to move back into the market, though it’s still unclear how much was bought. The supplier looks like Iran, which may be out of the market soon if U.S. sanctions succeed. The rally in wheat firmed demand ahead of fall seeding, though dry conditions are still a concern from the U.S. to Europe in the northern hemisphere. Costs at the Gulf jumped $9.50 last week on the India news, settling at $251.50. That translates into a replacement cost of around $400 on average at the retail level, but swaps into winter don’t show higher values in the offing. The retail market is still slow, with current costs $360 to $400 if leftover supplies are available.

UAN looks like the big winner from the wheat rally so far, which could bring rising costs for growers trying to book supplies soon. The Gulf index for 32% settled up $7.50 last week at $154.50, which translates to around $215 for 28%. But swaps show rising costs into winter that could boost prices to $250 or more. U.S. exports hit an all-time high in June, an indication that product was cheap compared to world values thanks to rising U.S. production.

 

Phosphates edged higher again last week, getting a boost from higher expenses for the nitrogen component of products if nothing else. The Gulf index for DAP was up another $2 to $406, continuing its steady march higher. Even a slow retail market is following suit, with updated average prices moving closer to the $500 replacement costs suggested by wholesale values. Some sellers are already asking $520 on the southern Plains, so this expense is one that’s not getting any cheaper. Swaps at the Gulf show prices easing $5 or so into winter, but not enough to have a major impact on the market.

 

Potash edged higher again last week at the Gulf in a market that also looks firm. Canadian companies continue to manage supplies by slowing production, a strategy that’s added nearly $50 to wholesale costs over the past two years. The current market suggests average retail charges of $380 into fall, though buying so far remains slow.

For more information about national and international fertilizer markets, go to Fertecon.com.

More from Farm Futures:
Corn Outlook
Soybean Outlook
Wheat Outlook

Download a complete version of the outlook with extensive charts and analysis using the Download button at the end of this report.

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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