DTN Fertilizer Outlook
Rise in US Corn Acres Could Boost Domestic Wholesale Ammonia, Urea Prices
AMMONIA
Domestic:
Prompt demand has largely gone into hibernation with the full onset of winter across the U.S. Good fall application volumes were reported out of the Southern Plains and Mississippi Delta regions, while Northern Plains states said last fall was lousy for ammonia. NOAA released December drought index numbers that showed soil moisture levels in December 2019 were the second wettest on record in the Corn Belt, which could indicate another poor spring application if fields remain saturated.
Some fields in the Dakotas and western Minnesota still hold corn and will need to be harvested before spring application begins.
Prompt prices in the Eastern Corn Belt were at $330-$350 per short ton (t) FOB (free on board -- the buyer pays for transportation of the goods) and $300-$330 in the West last month, and both have now consolidated within a range of $330-$350/t FOB.
A projected increase in corn acreage from 89 million to 93 million to 95 million acres bodes well for ammonia demand this spring, provided weather conditions improve over the previous spring season.
The outlook for domestic ammonia is stable.
International:
Global ammonia remained tight but flat in January with low demand in the west offset by plant outages.
The Tampa, Florida, ammonia contract remained unchanged from December at $250 per metric ton (mt) cost and freight (CFR) to January and rolled over again for February as well. The Far East CFR price has firmed to $295-$311, up marginally from $295-$307 last month.
Phosphate production cuts announced at the end of 2019 have resulted in less demand for imports. In the U.S., the curtailment announced by Mosaic in December of around 150,000 tons per month until markets improve has reduced Mosaic's Florida ammonia import needs, and no tons were shipped from Trinidad during January as a result.
Low-cost natural gas and less need for imported ammonia inputs for phosphate production in the U.S. could have ramifications on the agreement between Yara and Mosaic as an important market benchmark.
The short-term outlook for international ammonia is stable.
UREA
Domestic:
After a short rally spurred by an Indian import tender in late December, urea prices at New Orleans, Louisiana, (NOLA) fell for much of January, down from $222-$225/t FOB at the beginning of the year to $209-$215 by the end of the month. Seasonally slow demand domestically and a lack of drivers internationally led to the softening.
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River terminal urea prices were steady with $245-$255/t FOB available on open sections of the river system and $275-$280/t FOB in the Twin Cities market. Ex-plant values were flat at $250-$255 in both Oklahoma and Iowa. (Ex-plant price is the price at the factory and does not include any other charges, such as delivery or subsequent taxes.)
Relatively low prices at NOLA compared to other urea import markets like Brazil has led to a slowdown in U.S. arrivals. For the July-December period imports are down 17% from the same period last year.
The short-term outlook for domestic urea is stable, with downside limited due to a tight supply-and-demand balance considering the low level of imports thus far and high level of demand expected to support corn-planted acreage estimates of 93 million to 95 million.
International:
Global urea prices softened in January. Whereas urea in the U.S. has been losing value due to low demand, the fertilizer has been losing steam internationally due to oversupply. India left extra product in the market during its December tender, making purchases of 710,000 metric tons after getting acceptance of its counteroffer from suppliers totaling 1.1 million metric tons. India is not expected to tender again until March at the earliest. Until then, the market will rely on demand from Europe and the Americas to mitigate the supply glut.
Egyptian prices softened to a flat $240 FOB from $240-$245 in December. Brazil is slightly firmer at $245-$250 per mt CFR, up from $240-$243 last month.
The outlook for international urea is stable to leaning soft in the short term.
UAN
After several quiet weeks and no news regarding spring prepay, CF conducted a sales tender for UAN which ended Jan. 22. Full results were kept private, but a CF representative said they received over 75 bids in its system-wide tender for its domestic customers, resulting in sales ranging from smaller truck deals to a 10,000-ton-plus sale. The producer did not report any prices, but it said the tender "exceeded expectations" and "triggered positive conversations as well as fresh buying interest."
Following the tender, CF lowered its posted prices for 32% by $10 to $150/t FOB in St. Louis and Cincinnati.
UAN at NOLA also softened by about $10 to $125/t FOB after the CF tender with pressure also brought on by the arrival of more imported product from Russia and Trinidad.
East Coast CFR prices moved down to $145/mt from $165 at the beginning of year as overseas and domestic producers compete for limited distributor tank space before spring starts.
The short-term outlook for UAN is soft due to seasonally slow demand, but there is upside in the medium term as demand ramps up, especially if spring conditions prove too wet for widespread ammonia application.
PHOSPHATES
Domestic:
Prices on DAP and MAP are stabilizing after producers announced cutbacks to reel in supply. Ammonium phosphates gained $40 at NOLA from lows set at the end of the year, from $240-$250/t FOB at the beginning of January to $275-$280 at the end of the month with more firming expected. MAP has largely lost its premium over DAP at NOLA due to MAP-heavy phosphate cargoes arriving in recent months; however, barge prices remain largely in line with DAP at $275-$278/t FOB, up from $240 in early January.
River terminal prices along open sections made similar gains from $265-$270/t FOB DAP and $275-$285 MAP to now $305-$315 DAP and MAP. Markets on the closed sections of the river have remained largely steady throughout January at about $320-$330/t FOB.
With early pre-planting season buying largely complete, domestic phosphates markets look forward to spring demand and summer fill beyond that. Wet field conditions in the Corn Belt remain a concern, and good application conditions will be the key to demand. U.S. phosphates are stable in the short term.
International:
Against a backdrop of recent production cutbacks in Q4 in Morocco and China, the rally being witnessed in the U.S. market is quickly helping sellers achieve higher prices in other parts of the globe. The price of MAP into Brazil was the quickest to react with values jumping to $310/mt CFR from $276-$285 last month. However, prices in the east have seen as much change with DAP prices into India actually falling slightly to around $290 CFR as import demand remains out of season.
Now that we've seen production cutbacks successfully support prices internationally, at least in the west, the question remains what will happen once Morocco reenters the market full-force at the end of the month and if the reinstated supply does not erode prices to previous levels.
The short-term outlook for international DAP and MAP is firm in the west but fragile in the east.
POTASH
NOLA potash continued to see low interest sustained from the holidays with prices at $235-$240/t FOB before Nutrien announced their potash fill program, after which the market fell to $213-$215/t FOB.
Nutrien announced its fill program on Jan. 14 and received fair interest but lower-than-usual volumes, according to some in the market. Prices were $20 under summer fill levels at $260 FOB river and $270 inland terminals. Immediately following the fill, Russian producers started offering barges at $213-$215/t FOB NOLA.
River terminals prices weakened to $255-$260/t FOB, down slightly from $260-$270 in December.
An update from local news out of Saskatchewan indicates that production cutbacks at Nutrien's Vanscoy mine are to be extended until at least March. Production at Vanscoy was suspended in November with plans to resume production in late January. Mosaic also announced it was idling its Colonsay facility indefinitely, which has been offline since August of last year.
The short-term outlook for potash is stable to soft.
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Editor's Note: This information was supplied courtesy of Fertecon, Agribusiness Intelligence, IHS Markit.
(AG\SK)
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