By Logan Garcia
Market Reporter - Fertecon
Agribusiness Intelligence, IHS Markit
The following is a breakdown of wholesale prices and trends of the various fertilizers in the month of March and into the first two weeks of April.
Spring arrived in full force across the Corn Belt in April and extended periods of favorable ammonia applications resulted in strong sales, including terminals selling out with prompt tons unavailable for several days and plants putting customers on allocation. Activity saw a typical start in the Southern Plains but there were some delays in the Midsouth as rains pushed planting progress back slightly from average.
At the end of March when activity was just beginning, Eastern Corn Belt prompt ammonia prices were rising into a range of $380-$400 per short ton (t) free on board (FOB) while states west of the Mississippi lagged behind in price and the general application timeline, at $330-$350/t FOB.
Oklahoma ex-plant tons ended April $10-$30 higher per ton than previously reported at $340-$360. Prices settled at $340-$360/t at Iowa plants, up from $330 in March.
The outlook for U.S. ammonia is weak going forward as the U.S. market had a strong start to spring but will likely suffer from declining international prices and sluggish industrial demand stemming from COVID-19-outbreak-related tolls on the industry.
The global ammonia supply-demand balance was fragile before the COVID-19 outbreak, and reduced output at phosphate plants among other downstream ammonia consumers has resulted in a reduction of demand while for the most part supply remains steady.
Yara and Mosaic agreed to a reduction of the Tampa ammonia contract price for May to $235 per metric ton (mt) cost and freight (CFR), down from the $250 CFR price that held from December 2019 to April. Declines in the Tampa price follow overall bearishness in ammonia globally due to the current viral pandemic crisis.
Prompt ammonia values in the Baltic held steady through April at $218-$220 FOB. In Russia, prompt prices at Yuzhnyy, Ukraine, fell substantially to $201-$202 FOB from $219-$221 in March.
Overall, the global market appears to be oversupplied and is likely to face further downturns.
Coming out of March, urea prices appeared to still have upward momentum. However, with continued declines in the energy markets and Chicago corn prices nearing $3-per-bushel levels, weakness and uncertainty emerged as the main forces driving urea prices lower.
New Orleans, Louisiana, (NOLA) barge prices ended March at $245-$267/t FOB and were down to $223-$246/t FOB at the end April, trading as low as $218 when the West Texas Intermediate (WTI) crude oil futures fell into negative prices.
At lower Mississippi River markets, prices were $280-$300/t FOB in March and ended April at $295-$315/t. Cincinnati prices were reported as high as $335 in mid-April as availability was running tight.
Factory prices (ex-plant) in Oklahoma ended April at $300/t, $10 higher from March lows. Prices in Iowa ranged from $290-$310/t in March and in April settled at $300.
Considering recent losses related to crude oil prices and ethanol demand, urea prices will likely remain low until sidedress buying reaches peak demand. Urea should see continued demand through May, which will support prices. Our outlook on domestic urea is stable to firm through May with prices likely to fall after that into summer.
The urea market continued to see downward movement in April, with the world watching to see how spring would shape up in the U.S. for indications of whether the wider market could see strength or weakness. India announced the second tender for its fertilizer year to close May 7 for mid-June delivery, and thus should not create a large impact on U.S. prices before the spring season ends.
Outside of the U.S., prices in Egypt fell to $222-$225/t FOB from $239-$245 in March as European spring demand slowed. In Brazil, prices fell similarly from March at $245-$248 CFR to $220-$223 by the end of April, with sellers from multiple origins looking to liquidate product in this market.
We are seeing enough liquidity so far for traders to place product and then turn to producers to cover the sales, and this is preventing sharp reductions in Egypt and the Middle East FOBs. However, outside of India, there does not appear to be much prompt demand on the horizon, so the outlook is weak.
Tight prompt availability at NOLA continues to provide support for domestic UAN prices, as a decline in Russian imports from lower prices earlier in the year and lower U.S. production tightened the balance against expected strong nitrogen demand this spring. Freight rates for UAN vessels have also skyrocketed in the past month, making Russian UAN significantly more expensive to ship to the U.S. At the end of April, sidedress was underway in the South, and ammonia application was only just beginning in the Dakotas.
NOLA barge prices ended March at $135/t FOB and rose in April to $150-$155.
River terminal prices for 32% increased to $185-$190/t FOB in Cincinnati and St. Louis, up from $170-$180/t FOB in March. Product became scarcer into April with CF pulling out of the market in St. Louis entirely, leaving the market to wait and see producers' next move. On the East Coast, import prices largely held steady at $200/mt CFR.
The outlook for domestic UAN is stable heading into sidedress over the next several weeks but falling urea prices do not necessarily support further upward price movement for UAN at current levels. If urea prices end up rallying in the next two weeks, then UAN prices could continue increasing.
Phosphate prices rose and then fell in April with signs of softness into May. Although spring demand was reportedly strong, buying interest for new barges had slowed down significantly by the end of the month.
In March, NOLA DAP was assessed at $272-$275/t FOB and MAP at $275-$280 but ended April at $270-$278 for both products. Mosaic reported near the end of the month that it is sold out of barges and product for export through June.
River terminal prices rose to $310-$320/t FOB DAP and $310-$325 MAP. Prices reflect a $5-$10 increase from March where prices ended at $300-$310 DAP and $305-$315 MAP, with DAP seeing the most dramatic increases due to higher quantities of MAP imported during the month.
At the end of April, bids on DAP barges continued to drop into the low $260s, indicating further price weakness ahead for phosphates into summer. Attention will now turn to fill prices as dry application wraps up with traders eyeing up the international market for how the larger macroeconomic picture is shaping up.
The outlook on domestic phosphates is stable to soft.
Global phosphate prices took a downturn in April where Brazil MAP fell $10 to $305-$310/mt CFR from $315-$320 in March. India DAP prices fell from $314-$320 CFR to $314-$315 at last reporting with country continuing to purchase DAP at strong rates from Morocco, Saudi Arabia and Russia as its own production has been reduced due to the lockdown measures in place.
Despite supply interruptions, Chinese export prices fell in tandem with reduced industrial activity overall. With the Chinese season over, the country will be able to turn away from domestic needs and begin exporting as it recovers from the worst of the COVID-19 outbreak there.
The outlook on global phosphates is soft overall following a very active buying period at the end of 2019 and start of 2020. There is already sufficient stock in the market, permitting buyers to wait and see if prices will fall further before stepping back in.
U.S. potash saw increased demand from springtime buying at NOLA and the terminals, but prices have not risen significantly as supply remains widely available. Barge prices fell to $203 at the end of April after terminals saw good movement for preplant application earlier in the month, down from $205-$210 at the end of March. River terminal prices ended the month higher at $240-$260/t FOB but are expected to soften a bit once the season comes to an end.
Seeing as potash prices did not move significantly during spring planting, the weakness in the market could continue into summer. There is some opportunity for prices to stabilize if enough inventory has been cleared out for strong fill buying, but overall global supply remains plentiful against demand. The outlook on potash is stable to soft.
Editor's Note: This information was supplied courtesy of Fertecon, Agribusiness Intelligence, IHS Markit.
(c) Copyright 2020 DTN, LLC. All rights reserved.