DTN Fertilizer Outlook

Slow Application Season, Flooded Rivers Create Variances in Wholesale Fertilizer Prices

With UAN looking relatively attractive on a dollar-per-unit-N basis compared to historical spreads, growers and retailers may prefer to stay away from ammonia as much as possible. (Chart courtesy of Fertecon, Informa Agribusiness Intelligence)

Here is a breakdown of wholesale prices and trends of various fertilizers.

AMMONIA

International:

Global ammonia prices remain relentlessly weak. New export capacity, coupled with soft feedstock and phosphate prices, is pushing ammonia benchmarks toward the lowest levels since 2017.

Markets west of Suez remain the weakest, seeing the Tampa, Florida, contract for May being settled at an $18 decrease to $237 per metric ton (mt) cost and freight (CFR). Mosaic has completed the 300,000-ton (t) phosphate production cutback, but DAP and MAP prices remain very soft, and the spring application season in the Corn Belt so far has been dismal.

There has been continued talk of tightness in the Far East market, but no one appears to be running short. A higher price may be needed if the buyer there is squeezed for product. Lower numbers, however, are probably available if the inquiry is pushed further out.

Supply has been boosted of late by a restart in Algeria and the startup of the Kingisepp plant in Russia together with the odd spot cargoes from France adding to supply. This has been mitigated to some extent by spot inquiries from European buyers. However, with no sign of phosphate production increasing in Morocco or Saudi Arabia amidst a weak market, there will continue to be good volumes of ammonia available for export.

Overall, some continued slight weakness is expected in the short term due to weak phosphate prices and low natural gas prices.

Domestic:

The ammonia direct-application season ramped up strongly in the Western Corn Belt in April but lagged behind usual in the Eastern Corn Belt. Wet and cold weather this spring has tightened the preplant application window. With growers looking to make up for a poor fall season, distributors are finding it difficult to keep up with demand in some areas. Significant barge delays as well as a tight truck market are further contributing to the difficulty.

Domestic ammonia prices were variable in April with regional market dynamics influencing pricing. Most prices in the Corn Belt remain in the $500 to $545 per ton FOB (free on board -- the buyer pays for transportation of the goods) range, well above the typical U.S. Gulf-Midwest spreads.

Application is ongoing in the Western Corn Belt, but end-user demand has now passed the peak, and prices have slipped marginally late in the month to around $500 per ton FOB in Iowa. Expectations are for an average to above-average season, which is surprisingly positive considering the early spring flooding.

The Eastern Corn Belt continues to suffer from wet fields, and prices were unchanged at $515 to $545/t FOB. There are a few areas where preplant application and planting are taking place, but a widespread run has yet to emerge. It will be a tight application window when field conditions do finally improve. Fortunately, sidedress ammonia is commonly practiced, so some suppliers remain hopeful that a big sidedress run could boost volumes back to average levels for the spring. However, with UAN looking relatively attractive on a dollar-per-unit-N basis compared to historical spreads, growers and retailers may prefer to stay away from ammonia as much as possible.

Ex-plant prices (the price at the factory, not including any other charges, such as delivery or subsequent taxes) in Oklahoma were slightly softer from last month with the low end falling $10 to $350-$395/t. Kansas and western Missouri saw a good run of ammonia being applied, but focus has now shifted to planting and ammonia prices are expected to decline.

Overall, because of the poor fall season and what looks to be a mostly average spring season, total ammonia volumes for the fertilizer year are expected to be down. Producers are expected to lower prices in competition for end-of-season sales as well as for summer fill.

UREA

International:

The global urea market saw further firming in April with FOBs climbing, following an India tender concluded early in the month, and then again ahead of another late in the month.

In the first tender, India had an appetite for more but was only able to secure 372,000 tons from suppliers at the price of $251 to $262 CFR.

Egyptian producers were able to achieve as high as $263 to $270 FOB on the back of continued demand in Italy. Middle East prices were also supported by a perfect storm of traders still looking to cover for the previous MMTC tender, trader demand for Australia, as well as the latest tender announcement in India. The spot range moved up to $265 to $270 FOB in the last week of the month, compared to $235 to $240 at the end of March.

All eyes now turn to India, as events there will determine the continued direction of the market. Prices came in at $280 to $287 per mt CFR. India was last reported to be negotiating with suppliers, with expectations that 600,000 to 800,000 tons could be bought to ensure supply for the start of the kharif (autumn crop sown at the beginning of the summer rains) in June.

Amid all the bullishness, the Brazilian CFR market continues to lag replacement costs as more and more Iranian product is shipped here. U.S. sanctions have made it difficult to export urea from Iran, but global traders are understood to be concluding business into Brazil on barter agreement for grains. Iranian product is reportedly available at ex-warehouse prices equivalent to the mid-$240s CFR, so buyers are balking at higher prices from the Arab Gulf.

The price outlook is stable to firm depending on India.

Domestic:

New Orleans, Louisiana, (NOLA) urea barge prices rallied in April, trading as high as $296/t FOB as spring demand ramped up and logistic issues on the river system forced distributors into the prompt market to cover tons. However, by the end of the month, the scramble was over and prices fell back to around $260/t FOB, compared to $241 to $254 at the end of March.

Interior urea prices are firm. Navigation delays on the river system mean that tons closer to the farm are attracting a strong premium. Port Neal, Iowa, ex-plant price was up $75 from late March to $375/t. Twin Cities prices increased by $80 to $395/t FOB, as expected barge arrivals were again pushed back to now late May/early June. Buyers have backed off at these high levels, and there is talk of demand destruction. However, these numbers could get more digestible as the season progresses and inventories need to be replenished. On the other hand, with UAN relatively cheap compared to urea, many switching from ammonia will want to go with UAN rather than urea post-plant if possible. River terminal prices on open sections of the river system range from $300 to $340/t FOB, up from $280 to $290 last month.

There is both upside and downside risk in the short term for urea prices. Interior prices are expected to remain firm as logistics delays keep product tight. At NOLA, price action will depend on the success of getting barges loaded relative to the appetite of buyers, both of which largely hinge on weather conditions. However, in general, domestic urea prices are expected to trade lower toward the end of the season as the U.S. looks to deter imports.

UAN

Domestic UAN prices were variable in April, depending on where the market was in the supply chain. Most interior terminal and tank prices firmed slightly, while prices for barges and vessels softened a bit.

Following the European Commission's decision to impose provisional antidumping measures on UAN imports from the United States, Trinidad and Russia, supply in the barge market seems to be readily available, as with the East Coast import market. Barge prices eased to $160 to $170/t FOB, compared to $165 to $170 last month.

On the other hand, interior prices started to firm as the application season nears and on support from higher urea prices. CF took many of its prices up late in the month. Increases were variable with Port Neal, Iowa, seeing the biggest move to $240/t FOB, up $40 from last month. Mt. Vernon and Cincinnati were increased by $5 to $195/t FOB for 32. Farm-level activity has not started to ramp up yet, as corn planting is only 23% complete as of May 5. But buyers were actively securing tons, hoping to avoid as much as possible the logistics crunch being seen in ammonia and urea.

The short-term domestic price outlook for UAN is stable. The recent increase in urea prices has likely put a short-term floor in many domestic UAN prices. Furthermore, a shorter window for ammonia applications and an expected increase in corn planted acres will also be supportive for UAN prices once applications are underway. However, prices are expected to soften seasonally when sellers compete for end-of-season sales.

PHOSPHATES

International:

Prices for DAP and MAP continued to fall in April as global demand was insufficient relative to supply, despite product being taken out of the market through turnarounds.

With Brazilian import demand for MAP all but absent and European, Australian and East African markets between seasons, the focus of the market was on the Indian subcontinent. Price concessions were seen to secure much-needed DAP business at $385 CFR per mt late in the month, compared to $397 to $400 in late March.

Brazilian MAP purchasing continued at a snail's pace, and further price weakness was being felt with the market down to $385-$390 per mt CFR, compared to $395-$405.

There were reports of some Chinese producers planning production cuts totaling up to 800,000 tons of DAP in the second quarter. But it remains to be seen how successful they are, should the Indian market remain one of the few outlets open to suppliers in the coming weeks.

The tone of the market looks set to remain soft in the absence of additional cutbacks.

Domestic:

The absence of buying interest at NOLA, exacerbated by the delay of the opening of the Upper Mississippi and growing concern about demand destruction amid the logistics crunch, witnessed a further slide in pricing. DAP barges fell to $310-$313/t FOB NOLA, down from $332 to $334 at the end of March.

MAP prices are weaker yet, falling to $307-$309/t FOB. Traders are looking to re-export phosphates to Latin America as relatively low barge prices would indicate an arbitrage opportunity. Mosaic was also in the NOLA market looking to purchase barges for re-export to its distribution system in Brazil. However, no re-export sales have been confirmed besides one concluded by Nitron in early April.

Barge arrivals to St. Paul, Minnesota, are not expected until late May/early June, well after when corn is typically planted. With latest insurable corn planting dates approaching and barges of phosphates stranded on the river system, it is expected the application window will close before much of the product can make it to the farm. Therefore, these tons will carry over to the fall, which is adding further pressure on NOLA prices. Also, distributors may have had homes planned for barges, but now with supply lines disrupted, some are looking to sell those spot instead.

Interior phosphate prices are variable. River terminal prices for DAP on open sections of the river system range from $360 to $375/t FOB, generally flat from late March. MAP is generally priced on par with DAP. Prompt prices on the Upper Mississippi, where product is available, firmed by $5 to $15 due to resupply delays with DAP at the Twin Cities at $405/t FOB and $400 for MAP.

The domestic price outlook continues to be slightly soft in the short term. However, as imports slow and the river conditions improve, prices are expected to stabilize. Interior prices have room to move down given current replacement costs, but regions in a logistics crunch are likely to see further increases as product in place commands a higher premium.

POTASH

Domestic potash prices were slightly softer in April. Wet weather continues to hinder preplant work, and the thought of higher inventory carryover, against a backdrop of weakening crop prices, is leading to a bearish sentiment in the marketplace.

NOLA barge prices were last reported at $265-$272/t FOB, edging down from $270 to $275 in late March. River terminal prices on open sections of the river system were steady around $305-$315/t FOB, and prices on closed sections of the river firmed to $315-$325.

In the Corn Belt, Iowa has probably seen the most progress, with 36% of the corn planted as of May 5. Reports continue that many farmers are going straight to planting after getting N down and are skipping P and K applications. Iowa distributors reported plenty of potash around to service demand. Some spot trade surfaced as buyers looked to secure their final spring needs, and $325/t FOB inland warehouse was reportedly able to be agreed with North American producers -- meaning the $10 increase posted following winter fill was not able to be achieved. It remains to be seen if producers can achieve the price increase in other markets.

The domestic price outlook for potash is soft in the short term.

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Editor's Note: This information was supplied courtesy of Fertecon, Informa Agribusiness Intelligence.

(AG/CZ)