DTN Fertilizer Outlook

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 July and into the first two weeks of August.

AMMONIA

Domestic:

Ammonia saw some activity during a very slow beginning to July when CF announced fall prepay prices on the morning of July 9. CF announced fall prepay pricing with initial offerings reported at $330 per short ton (t) free on board (FOB) North Dakota and Minnesota, $340 Illinois, $330 Indiana, $320-$330 Nebraska and Iowa and $250 in eastern Oklahoma. Koch announced its own program shortly after at prices in line with CF.

This year's prepay reflects a $40-$45 decrease in initial prepay offers from last year, and a $70 reduction in eastern Oklahoma prices. In 2019, CF undercut Koch's prices at $360 per ton, and after Koch matched CF, both companies reoffered prices $10 higher shortly thereafter. Response from buyers was lackluster, however, as prices were too high to attract much interest during this seasonally slow time for the ammonia market.

Prompt ammonia prices remained flat in July at $285-$290/t FOB in the Eastern Corn Belt and $265-$290 in the Western Corn Belt, with little sales activity reported across the region. Both fill and prepay prices were still said to be available in most of the U.S. at the end of the month, although much of the buying appears to have been completed immediately following initial announcements.

USDA lowered its estimates on 2020 U.S. corn area in its June Acreage report to 92.0 million acres (ma), which was 5 million lower than its March projection. However, corn prices overall have remained weak since early July as favorable weather has maintained positive crop conditions and yield forecasts. In the last week of July, both corn and soybeans were rated above 70% good to excellent, which has kept pressure on crop futures prices as well as put a damper on interest in spending more than necessary on fertilizer.

High yields plus less early buying could bring heavier spot sales in the fall, along with tighter supply and higher prices. The short-term outlook on domestic ammonia is flat in the short term, however, on weak crop prices and seasonal slowness predicted to continue through August.

International:

Yara and Mosaic agreed to a rollover of the Tampa contract for August at $205 cost and freight (CFR). Plentiful supply and sluggish demand contributed to the rollover, as well as supply corrections with a few plant outages in Trinidad from Nutrien and Yara. The U.S. domestic market, however, is largely unconcerned about the contract price currently due to a seasonal lull in activity.

Industrial demand continues to slowly recover from worldwide ammonia demand destruction during the initial outbreak of COVID-19 in the spring. For the most part, the Eastern Hemisphere is faring better than the Americas, as India has been in the market for phosphates and urea during a larger-than-average crop season. Weak demand and reported maintenance on a pipeline have also allowed U.S. Gulf ammonia producers more opportunities to export ammonia.

The Baltic contract price decreased in July to $176-$180 per metric ton (mt) cost and freight (CFR), down slightly from $178-$181 in June. The spot price in Yuzhnyy, Ukraine, also dropped lower to $175-$181/mt FOB in June, after ending June at $180-$185.

Overall, the outlook on global ammonia improved in July from soft in June with some feedstock demand returning, but supply continues to exceed demand. The outlook in global ammonia is flat to firm.

UREA

Domestic:

As application in the U.S. slowed down in July with the end of side and top dress, the urea market looked toward the international market for guidance on price movement. India was struggling to buy enough urea to meet its needs using its tender-driven approach to supply, which drove prices higher in most world markets, including the U.S.

The New Orleans, Louisiana, (NOLA) urea barge price ended June at $194-$203/t FOB and rose steadily throughout July, ending the month at $215-$220 and continuing to rise in early August.

Mississippi River terminal prices varied between $225-$245 in June and followed NOLA prices higher, ending July at $245-$260/t FOB. Prices in Oklahoma at Catoosa and terminals along the Arkansas River are typically in the lower end of this range; however, planned lock and dam maintenance on the river in mid-to-late August has driven prices $10-$20 higher than expected in anticipation of strained supply.

Factory prices ex-plant (the price at the factory, not including any other charges, such as delivery or subsequent taxes) in July rose to $265-$270/t FOB in eastern Oklahoma, an increase of almost $50. Meanwhile, plant prices in Iowa were available well below nearby markets at $240/t FOB for some time until offers were pulled and raised higher in early August.

Urea prices in the U.S. are expected to continue following the international market through August on slow demand domestically. With India poised to continue its efforts to raise prices and buy enough urea for its strong demand, the outlook on U.S. urea is stable to firm in the short term.

International:

July saw two more purchase tender attempts by India to supply its kharif (wet, summer season) crop, which has seen lots of rain and favorable conditions as well as diminished stocks, which were a result of the COVID-19 outbreak preventing it from tendering earlier in the year.

The results of both tenders, like the four that preceded them this year so far, were disappointing and under expectations, which led to immediate re-tenders. This is largely due to China's lack of participation, on factors which could include low supply due to plant maintenance earlier this summer or dissatisfaction with India's offers, which average $40/mt lower than this time last year.

Brazil has also continued to see strong demand, and between the two markets, the global urea market has regained some footing and achieved higher prices than expected earlier. In Egypt, prices firmed from $239-$241/mt FOB in June to $250-$260. The Brazil price also rose nearly $30 from June to $265-$269/mt CFR.

The global market is expected to stay firm to slightly flat on potential for more Indian tenders to come to fill continued high demand and low stocks through August. However, prices could weaken if China begins to sell more product into India, where monsoon rains are also beginning to show signs of slowing, which could reduce urea needs.

UAN

After some initial excitement after the fill announcement in late June and the completion of top and side dress applications, UAN prices stayed largely stable at fill values. Despite urea prices continuing to rise in July, terminal values on UAN were flat with plenty of supply in the market but little demand, culminating in little pressure on current prices. Some movement and application activity were observed in the Midsouth and Texas on rice, but overall, July was uneventful for UAN.

NOLA UAN settled at $115-$120/t FOB in July, in line with where Cincinnati barge prices settled after fill in June but $5-$10 down from late June. Continued soft fundamentals and a lack of support from urea prices helped keep prices stable throughout the month, alongside a quiet import market.

River terminal prices were also largely flat on UAN throughout the month, settling at $147-$152/t FOB at major markets, including St. Louis and Cincinnati. On the East Coast, the price of UAN was flat from the end of June into July at $140-$145/mt CFR, a market that also remained inactive in July.

The lack of pressure on UAN while urea prices saw rapid gains at the end of July means that UAN is more attractive than urea on a dollar-per-unit nitrogen basis. The short-term outlook is flat on UAN, with many in the market apparently comfortable that these prices will stick around for some time and at a favorable spread to urea in terms of nitrogen value no less.

PHOSPHATES

Domestic:

July saw rapid firming in price on phosphates in the U.S. as the market discussed implications and waited for news regarding Mosaic's petition with the United States government requesting the initiation of countervailing duty investigations into the import of phosphate fertilizers from Morocco and Russia. Imports of phosphates to the U.S. have somewhat dried up as a result, leaving Mosaic as the primary source of phosphate barges and trucks in the market.

Speculation over the impact of potential import duties led to price hikes in DAP and MAP barges at NOLA to $320-$325/t FOB DAP and $325-$330 MAP, up from $274 on both varieties at the end of June. Phosphates saw little demand at the retailer level with traders responsible for much of the gains, as well as limited supply as importers put a pause on new shipments to the U.S. after the announcement.

Mississippi River terminal markets followed price hikes at the U.S. Gulf and rose to an average of $345-$360/t FOB to end July, compared to $295-$310 the month prior. Both DAP and MAP are said to be running tight on availability, contributing to the higher prices.

While the market awaits a more definite answer on what exactly will be the outcome, phosphate prices are expected to stabilize or potentially firm further if supply continues to remain tight in the short term.

International:

With little product uncommitted for shipment over the coming weeks, DAP and MAP prices are firm from all origins, with production problems in North Africa adding to the squeeze on supply. The continued disruption of supply from Tunisia has benefitted Moroccan and other traditional DAP suppliers to Europe, with Moroccan and Russian producers achieving higher prices. The main driver of the market remains India where demand for DAP continues to be healthy.

Like the U.S., the international phosphates market has firmed in the past month in the wake of the countervailing duties complaint. In Brazil, the price of MAP rose from $320-$325/mt CFR in June to $335 last month. A price increase of $10 was also observed in Indian DAP prices to $326, from lows in June at $317.

With Morocco and Russia being the only two countries explicitly named in the complaint, nontraditional exporters to the U.S. have emerged in the past month. Australian MAP, Egyptian DAP/TSP and Lebanese TSP booked for the U.S. as the market awaits the first hearing on U.S. countervailing duties on Moroccan and Russian imports. Pending an announcement regarding the investigation, the outlook on phosphate prices in the international market is firm.

POTASH

While urea and phosphates were uncharacteristically active in July, potash maintained the status quo with a relatively quiet month at a traditionally slow time of year. Most in the market are comfortable leaving prices at fill levels that were announced in mid-June. Supply seems to have been balanced in North America with plant idling and rollbacks on mine output activity reported at the end of 2019.

The NOLA barge price fell $5-$10 on low interest and trading activity to around $190/t FOB. River terminals followed suit and settled $5 lower to $225-$235/t FOB. Demand is expected to pick up somewhat in the fall as USDA and other surveyors continue to report positive crop condition ratings and high yield forecasts, but truck and barge movement remained limited in July.

Demand remained low and imports to the U.S. were lower as a result, supplied mostly by Canada and limited amounts by Belarus. For its role in the market, Intrepid Potash forecast potash pricing to remain at current levels through September. With few other fundamentals to consider besides when fill prices will inevitably reset, the price outlook on potash in the U.S. is flat in the short term.

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

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