DTN Fertilizer Outlook

Urea Sales Bump Up Ahead of Winter Weather Predictions

(Chart courtesy of Fertecon, Agribusiness Intelligence, IHS Markit)

The following is a breakdown of wholesale prices and trends of the various fertilizers in the month of August.

AMMONIA

International

The bulls prevailed in August with Mosaic agreeing to $225 metric ton (mt) CFR (cost and freight) for September ammonia deliveries into Tampa -- up $10 from the August contract. This is largely thought to be a result of global tightness, namely due to outages in Algeria and Saudi Arabia, as phosphate demand and phosphate prices are still very poor and there is concern about fall demand for ammonia in the U.S.

Yuzhnyy, Ukraine, metric tons traded up to around $220 FOB (free on board -- the buyer pays for transportation of the goods) early in the month as spot buyers faced minimal supply options, considering outages in Algeria. However, Yuzhnyy, Ukraine, prices stalled at this level for the remainder of the month as a few producers returned to production and spot inquires faded.

Europeans may find the market tight with spot interest from France, Belgium and Poland mopping up metric tons and inquiries from all three are still reported. OCP, an exporter of phosphate in Morocco, has also bought spot metric tons and could still be a buyer.

Heading into September, the market is looking a lot more positive but there is still a cautious air to the market as supply in the Middle East and Algeria improves.

Domestic

Domestic ammonia markets were mostly quiet in August, but some softer pricing was evident in the Southern Plains.

The main topic of conversation continues to be expectations for the fall application season. Corn harvest will likely be delayed by one to two weeks this year due to the late spring planting and wet weather in some areas, which could shorten the application window, especially if there is an early winter. However, there are roughly 19 million prevented planting acres, 11 million of which are corn, some of which could be ready for application as usual or even earlier depending on the weather.

For what it is worth, the Farmers' Almanac is predicting a "Polar Coaster," which they say means the weather this winter will be characterized by fluctuating mild and extremely low temperatures and above-normal precipitation. The NOAA official winter outlook will be published in October.

Corn Belt ammonia FOBs were flat during August with prompt prices in the $320 to $350 per short ton (t) range, while fall prepay is at $375 to $395. There have been reports of some Eastern Corn Belt producers willing to sell tons on a prompt delivered basis that would netback (the gross profit per short ton) below FOB list prices.

CF took its Oklahoma ex plant prices down $20 during August to $260/t FOB for prompt September shipment and $300 for fall prepay. More competitive truck FOBs are understandably needed as Woodward has reportedly returned to production following a planned turnaround some say lasted over a month, and took longer than expected. Additionally, the southern end of the Magellan pipeline closed on Sept. 1 and the Arkansas River remains closed from Van Buren to Catoosa, so CF is no longer able to inject into the pipeline and is currently unable to ship barges out of Verdigris.

The domestic price outlook is stable in the short term and weather dependent in the medium term. Some increases are expected to be achieved in season, but it is hard to say if producers will be able to maintain the current prepay level or if slightly lower prices will be required.

UREA

International

The urea market trended downward for most of August, owing to Chinese supply and the absence of India, while the North African market bottomed out at the end of the month thanks to European short-covering.

Middle East FOB values ended the month at $251 to $253 mt, down from $283 to $285 in late July, with slow demand pressuring sellers to cut prices. Brazilian import demand was subdued due to the continued arrival of cheap sanctioned product out of Iran, and India was absent from the market, apparently comfortable following its 1.7 million metric ton (mmt) purchase in July.

North African FOBs bottomed out at $250 in mid-August but rebounded to as high as $270 by the end of the month, compared to a high of $280 at the end of July. Most sales have been to traders and are expected to cover shorts in Europe.

Moving into September, India has already announced a new tender for shipment through mid-October, closing on Sept. 13. The announcement has held prices stable to firm from the end of August. Where prices will go in the remainder of the month will depend upon how much India buys and how much China puts on offer.

Domestic

New Orleans, Louisiana (NOLA), urea barge prices were rangebound in August, ending the month at $250 to $257/t FOB against $254 to $258 during the last week of July.

Overall, the U.S. market seemed fairly balanced and barge prices held relatively firm compared to other global markets. The last date for shipments from NOLA to St. Paul is four-to-six weeks away, depending on the barge line. The Farmer's Almanac is predicting a wet winter and the Army Corps of Engineers is planning lock maintenance at mile 273 until March 31, so some are saying there is increased possibility of another late river open next year, which seems to be bringing in a few buyers for more pre-river close tons to ensure supply for spring. Also, CF has been exporting out of Donaldsonville, mostly to Chile, limiting their barge availability and there has not been many imports that have arrived since the end of spring.

River terminal prices were off $5 on average from late July down to $285 to $290/t FOB. End-user demand is seasonally slow, but some sales were reported as dealers looked to add to their fall positions. Urea demand for winter wheat has been poor, mostly due to weak wheat prices.

Ex plant prices are unchanged at $290/t Port Neal and down $15 to $300/t FOB at Enid.

The Arkansas River from Van Buren to Catoosa remains closed. There is no official timetable for when this section of the river will reopen for barge travel. Thoughts are that it will be at least Oct. 1. Distributors are transloading from other points on the Arkansas and Mississippi rivers in the meantime as well as relying more on domestic production points such as Enid and Borger.

The urea price outlook is mostly soft in the short term with supply expected to improve on the arrival of imports and the expectation of minimal exports for September. However, river close demand may lead to some bullishness in the very short term.

UAN

Domestic UAN markets were mostly quiet in August, with the market still awaiting the return of CF for a second round of fill. Expectations for the new price level have tempered over the past few weeks with most now expecting CF to only increase by $0 to $10 from the initial fill level.

In the absence of CF, UAN prices crept higher since the initial round of fill, despite finding little liquidity. NOLA barge prices were reported at $155 to $160/t FOB in early September, which is up $17.50 from the average price during the first week CF announced fill in end of July.

River terminal prices were last reported around $180 to $205/t FOB, which is up about $5 to $15 from the first round of fill.

The outlook for domestic UAN prices is stable, with a positive follow-through from buyers during the initial fill likely to continue to support the current price level. The upside seems limited, however, with the EU duties likely to further leave the U.S. well supplied. Furthermore, the Argentine market crash and devaluation of the currency, is likely to hamper the country's UAN import demand, which may force exporters to look more towards the U.S. as they face limited other options.

PHOSPHATES

International

Global phosphate prices continued to fall in August due to oversupply and low import interest amid buyers' perception of the further market weakness.

In Brazil, the price for MAP has slipped to $330 mt CFR from $345 to $355 in late July. The market appears to be awash with unsold product following a buoyant shipping campaign by all the major producers. Product is stacked up at the ports and needs to move through the system, but activity on the ground is slow, and therefore, prices remain under pressure.

In the east, lower prices netting down to the mid $320s FOB have been settled for Saudi Arabian DAP in India, and to the very low $320s FOB for Chinese DAP in Pakistan. Chinese FOB prices were around $340 in July. Some believe there is an element of traders shorting the market, lacking confidence in phosphate prices for the remainder of the third and fourth quarters.

Fragile economies weighed down by currency and political uncertainties are not helping the phosphate market. Argentina is one case where a depreciating peso has handcuffed importers, and China is another where the falling renminbi has made exports more attractive.

The price outlook remains soft in the short term.

Domestic

NOLA barges prices moved down again in August with DAP trading at $281 to $285/t FOB and MAP at $281 to $288 during the last week of the month, compared to around $300 to $305 for both products in late July.

Even the impending river closure is not enough to support barge prices as buyers suffer from high carryover and fresh import cargoes continue to arrive. Furthermore, end-user demand for the wheat run has so far been dismal due to the poor price for wheat.

River terminal markets are mostly quiet, and prices are slightly softer. Quotes for DAP and MAP are mostly in the $315 to $325/t FOB range, down $20 from late July. The price of $315 for DAP out of the Twin Cities is the lowest price since November 2009. Considering it has been nearly 10 years since prices have been this low, dealers are starting to think about taking bigger positions than they normally would for this time of year.

In early September, Mosaic announced it will idle it Louisiana phosphate operations to reduce production by approximately 500,000 t in 2019. The producer also followed up the announcement by increasing its barge offers to $295/t FOB.

The outlook for NOLA phosphates is stable in the short term with Mosaic's production cut providing support until the fall application season begins.

POTASH

Domestic potash prices are under pressure, and it is becoming more and more apparent that the $25 dollar producer-led price increase following summer fill will not be sticking anytime soon. In fact, prices now appear at risk of falling below summer fill levels. Purchases with producers for fourth-quarter shipment are being reported at summer fill values at various terminals across the Midwest. It appears that a strong fall application season will be needed to clear out enough inventory to support any price increases.

The barge market continues to soften with prices edging down $2 on average from late July to $243 to $247/t FOB NOLA as buyers remain disinterested amid high carryover and slow end-user demand.

River terminal prices were steady to slightly softer at $275 to $285/t FOB.

The outlook is steady in the short term but downside risk is slightly more evident in the short term than potential upside.

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

(BAS/CZ)