DTN Fertilizer Outlook
Prices Higher for Fifth Straight Week
The following is a breakdown of wholesale prices and trends of the various fertilizers.
AMMONIA
International
The global ammonia market seems to have finally cooled off following a bull-run stretching back to May. Prices ended October roughly flat from September with generally little new business being concluded.
A signal to market direction is awaited from India where the latest import tender closed but an award has not been reported. The general feeling is prices will be lower. Middle East FOB (free on board -- the buyer pays for transportation of the goods) values edged lower in October with contract business concluded at $333 to $355 per metric ton (mt) FOB, compared to $353 to $358 at the end of September.
The next test of the Yuzhnyy, Ukraine, level is also awaited with prices unchanged from late September at $345 to $355 per mt FOB. Supply should improve in November with pipeline maintenance completed, but there are still delays in the Turkish Straits, making journey time a little unpredictable.
Yara and Mosaic settled the price for November at $355/mt CFR (cost and freight) Tampa, Florida -- representing a rollover from October and the first non-increase to the price since May.
The short-term price outlook is stable to weak. With supply expected to improve in the fourth quarter for most regions, prices should start moving down by the end of the year.
Domestic
Interior ammonia prices firmed in October as the direct application season kicked off in the Corn Belt. There was good fall application progress seen in many areas of the Corn Belt late in the month, and there is a generally positive outlook for demand moving forward through November.
Producers in Iowa have increased prices to $470 to $475 per short ton (t) FOB, compared to $445 in late September. Iowa was slow to get started with ammonia application due to wet weather in October, but conditions improved enough to get started in many areas by the end of the month. If the weather cooperates in November, it could still be a good season. The positive developments have some dealers looking to further their positions.
Distributors in western Minnesota and eastern North Dakota report being about 30% to 40% complete with fall anhydrous work. If forecast rain does not slow things down too much, dealers expect to return with further requirements shortly. The price at the Twin Cities is firm at $490/t FOB, up from $450 in September.
Application activity in the Southern Plains has remained much more subdued; nevertheless, ex-plant prices (the price at the factory, not including any other charges, such as delivery or subsequent taxes) increased to $390 to $430/t FOB from $375 to $390 in late September. Soil temperatures are a bit too warm yet, and fields are too wet for farmers to apply ammonia. But, what really matters still is getting the crop out.
The short-term outlook for domestic ammonia prices is stable to firm as end-user demand ramps up and there appears to be sufficient opportunity for application in many markets.
UREA
International
The urea market started October on a firm footing. India showed it was ready to pay up in the absence of Iran, securing around 749,000 mt at a price of $353 to $356 CFR -- nearly $80 higher than in the previous tender held back in August. News of delays and a possible scrapping of awards of an import tender in Ethiopia then cast a cloud of doom over the market, mainly affecting Brazil, which moved down to $330 to $335/mt CFR by the end of October, compared to $330 to $345 early in the month.
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At the end of the month, the urea market continued to see some corrections downward, following a lower-than-expected result in Pakistan's import tender. But, in general, the outlook for the rest of the year remains positive. Expectations are India will return for another tender in November. Chinese availability still is limited and Turkey and Europe need to increase buying.
That being said, the urea market is likely to continue correcting downward in the very short term until there is word from India.
Domestic
It was a quiet month for the domestic urea market, and this led to some softening in urea prices. New Orleans, Louisiana (NOLA) barge prices ended the month at $287 to $300/t FOB, compared to $310 to $325 in late September. Wet weather across the Midwest for much of October meant little urea warehouse disappearance and therefore little demand to replenish stocks. At the same time, imports ramped up to the strongest level since spring. Market participants expect prices to continue drifting lower until activity in the countryside improves and/or India announces a tender.
River terminal prices are down to $330 to $345/t FOB from $350 to $355 in late September. Some wholesalers have elected not to move prices lower quite yet, as there would be no interest from buyers regardless. Tulsa prices are down to around $330/t FOB as barge prices flounder and winter wheat demand is slow due to wet weather.
The short-term outlook is somewhat soft with slow demand domestically and little excitement internationally. However, as domestic end-user demand ramps up modestly and India returns with another tender, prices are expected to stabilize and/or appreciate.
UAN
The domestic UAN market also had a quiet month with domestic nitrogen producer CF once again on the sidelines, withholding offers. It has become apparent that CF is comfortable with its sales for the fourth quarter following strong export orders, summer-fill commitments, and volumes sold in last month's "river tender." UAN prices continued to firm through October in CF's absence with many buyers looking to further their supply positions and replacement costs from the international market implying higher prices.
NOLA barge trade was inactive with prices at $215/t FOB for most of October, compared to $205 to $215 in late September.
Inland UAN markets were also quiet with many in the market continuing to push back decisions, awaiting the return of CF. River terminal prices are up about $15 from last month, with 32% north of Cairo for Q4 shipment at $245 to $255/t FOB. Tons priced around $230 to $235/t FOB are still available on the lower Mississippi. Prepay tons for first quarter/second quarter shipment are generally at a $5 to $10 premium to Q4.
UAN was more active on the import front with multiple Russian cargoes sold late in the month. Acron sold a vessel at $263 to $265/mt CFR equivalent into the U.S. East Coast, while EuroChem sold 30,000 mt UAN into the U.S. East Coast at $268/mt CFR, up nearly $50 from CFR indications in late September.
The short-term price outlook for UAN is stable to firm due to higher replacement costs from the international market and unmet domestic demand.
PHOSPHATES
International
Global phosphate FOB values inched lower in October with slower demand both east and west of Suez.
Despite a continuously weakening rupee in India, increasing phosphoric acid prices have meant higher costs for domestic phosphate producers, which has allowed finished phosphate imports to become more competitive. India purchased Saudi Arabian, Chinese and reportedly Australian DAP at delivered prices in the high $420s/mt CFR, steady from late September.
By comparison, the lack of demand for DAP and MAP in markets west of Suez relative to supply caused delivered prices to fall in the second half of October. Importers in the key South American market of Brazil bought U.S. and Moroccan MAP at $450 to $455/mt CFR, compared to $455 to $459 in late September.
Firming freight rates exacerbated the fall in producers' returns with phosphate fertilizer demand inadequate to permit manufacturers to pass on this rising cost to buyers. Chinese DAP values came under a little more pressure, falling to $407 to $412/mt FOB from $410 to $415 at the end of September.
The outlook for global phosphate prices is slightly soft with producers expected to accept lower numbers in the coming weeks to keep metric tons moving as global demand on the horizon appears thin.
Domestic
Phosphate barge prices softened in October with wet weather stalling harvest and therefore fall phosphate applications. DAP barge prices eased to $417/t FOB NOLA, compared to $421 to $425 last month, and prices for MAP barges were traded down to $425 to $427/t from $430 to $432/t.
River terminal prices are mostly steady to slightly softer from last month with DAP around $445 to $455/t FOB and $455 to $465 for MAP. Shipments to the dealer level are ramping up, but so far, most of this movement has been the execution of old contracts and not spot new sales. Given good weather, wholesalers are expecting more hand-to-mouth demand to emerge in the coming weeks. Supply seems relatively balanced in most regions, and sellers are in no hurry to cut prices or chase sales despite slightly weaker replacement costs out of NOLA. That being said, many wholesalers are concerned the delayed harvest, combined with the price level of phosphates vs. grain, will see many end users scale back application rates this fall.
It is likely the supply-and-demand balance will tip in favor of the buyer later in the year. However, the short-term outlook remains mostly stable with applications ahead and supply for the fall season fairly tight, so upriver and inland pricing may gain a premium to NOLA at some point early in the fourth quarter.
POTASH
Domestic potash prices continued to firm in October on limited supply and a generally bullish outlook amongst market participants. Barges traded as high as $285 to $290/t FOB NOLA at the end of the month, compared to $265 to $270 in late September.
River terminal prices are also up significantly from September, currently running around $310 to $315/t FOB from $285 to $300 last month.
Fall potash application work in the countryside is picking up steam as weather and field conditions improve, and more farmers wrap up harvest. Although it is not the early harvest once expected, it is not too far behind average, and cooperative weather in November should allow for plenty of opportunities for fall fertilizer applications. However, like phosphates, many wholesalers are concerned the delayed harvest, combined with the price level of potash vs. grain, will see many end users scale back application rates this fall.
Even with some concern about cutbacks in application rates, expectations are prices will hold firm at current levels through the end of the season. Higher prices are expected by spring due to a firm international market and balanced-to-tight North American supply.
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Editor's Note: This information was supplied courtesy of Fertecon, Informa Agribusiness Intelligence.
(AG/CZ)
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