When India talks in the fertilizer market, the world listens. The large importer of urea and other products stoked the fall rally that took prices to three-year highs. But prices could be headed in the other direction following news today of lower prices and plentiful offers from suppliers in India’s latest big purchase.
Ammonia costs showed signs of weakness last week even before the India news broke, though a pullback in some wholesale markets seemed more about the specifics of weather than anything else. Prices at terminals on the Plains pulled by $5, as wet conditions, including snow, delayed the fall harvest and winter wheat seeding. Corn harvest is lagging behind average levels by double digits in the Dakotas, further dampening demand, with wet weather looming in the 8- to 14-day forecast across much of the U.S. Retail prices on average edged about a quarter lower to $497.25, but still look about $25 to $30 lower than replacement costs for any dealers still trying to move product into position.
Urea swaps at the Gulf for December dropped $10 Tuesday ahead of the India tender results, which brought prices around $20 below the country’s last big purchase in early October. That was the deal that appears to have topped out the market, coming in nearly $60 above the previous purchase in August that got prices moving again. International prices had been trying to rebound when news of the tender broke last month, but that upward momentum is over for now. While retail offers were little changed last week, keeping our average at $400, river terminals were already pulling back due to a combination of lower costs at the Gulf and the slow application season. Our projected replacement cost for winter make the current retail market look fairly priced, so much will depend on how much the international market retreats into winter. Lack of fall business could lead to a scramble, especially if winter affects movement of product.
UAN has looked cheap all fall, at least at retail price points where few dealers updated offer sheets. That changed last week. Though not a lot of product is moving, some dealers raised offers on 28% by nearly $30 reflecting supplies that are somewhat limited right now by lack of manufacturer selling. Overall the average retail cost for 28% went up nearly $5.50, though at $246 it still looks undervalued, with $280 to $300 more in line with replacement costs. UAN swaps eased a little yesterday on the downturn in urea, however.
Phosphate costs continue to be impacted by the fluctuations in the cost of the nitrogen component of products, making the path of least resistance lower. The index for swaps at the Gulf dropped $3.50 last week to around $412.50, talking the projected replace cost to around $513 at the retail level, in line with our average price from dealers of $516. Prices could be headed lower due to bad weather for applications and expectations imports will rise.
Potash held steady last week, keeping Midwest terminals at $319 and the Gulf at $291. Retail prices showed little change, keeping our average around $368, which still looks as much as $40 too cheap based on replacement costs.
For more information about national and international fertilizer markets, go to Fertecon.com.
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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.