DTN Fertilizer Outlook
Potash Prices Rising, But Most Other Wholesale Fertilizer Prices Expected to Remain Stable
The following is a breakdown of wholesale prices and trends of the various fertilizers in May 2021.
Despite the lower Tampa ammonia contract settlement between Yara and Mosaic for June at $535 per metric ton (mt) cost and freight (CFR), a $10 drop from the previous month, prices did not immediately fall lower in the U.S. in May as spot sales became uncommon with unfavorable direct application conditions in the Corn Belt.
As a result of the poor conditions and most ammonia direct application having already been completed, prices in May were flat from April at $600 to $650 per short ton (t) free on board (FOB) in the Corn Belt.
Plant turnarounds at Nutrien's Geismar ammonia plants, as well as continued repairs on the Waggaman plant in Louisiana, limited ammonia output in the U.S. Gulf, which was supportive of ammonia prices in May. Several other plants have scheduled downtime in June and July, which will further curtail available domestic volumes ahead of summer fill announcements.
Despite most U.S. nitrogen plants having recovered from February's winter storms, long-overdue turnarounds that were put off in 2020 will likely continue to constrict U.S. ammonia volumes over the summer, leaving our short-term price outlook stable for domestic ammonia.
News that Saudi Arabian producer Ma'aden suspended production at its 1.1 million mt per year MPC plant following a fire in late May sent ripples across the ammonia market, primarily in the Eastern Hemisphere as plant outages and turnarounds also provided support to world ammonia prices.
Despite end-of-May discussions around new sales at higher prices in Southeast Asia, Black Sea ammonia prices had fallen to $425 to $435 per metric ton (mt) CFR in May, $40 lower from high trades in April but $10 above the lowest prices. Baltic ammonia meanwhile fell to a lesser degree to $450 to $452/mt FOB from April levels in the high $460s.
With more relative plant downtime in the Eastern Hemisphere compared to the west causing a clear disparity in supplies between the two, our short-term outlook is firmer in the former but weaker in the latter. Firmer sentiment is expected to prevail and is evidenced by quickly rising ammonia prices in early June.
With May urea imports bringing year-to-date supplies near levels in the 2019-20 crop year, U.S. urea appeared stable in the previous month with price direction influence dependent on Chinese domestic demand, which saw world supply restricted due to the country exporting little of its urea production.
NOLA (New Orleans) urea barges were assessed at $385 to $395/t FOB for prompt shipment at the end of May, higher compared to $360 to $392/t FOB in the previous month. Loaded barges traded as high as $405 by the end of May and would continue to trend higher on lower-than-expected purchases by India of world supplies.
Firmer sentiment developed in the barge market as India's fourth tender of the year emerged by month's end and transit logistics on the Mississippi River remain strained but averted potentially larger disruptions from highway bridge maintenance in Tennessee.
River terminal volumes rose to $425 to $440/t FOB. Plant urea offers were up $5 in May at $425 to $430/t at Port Neal in Iowa, while Enid in Oklahoma varied from $420 to $440/t with deals depending on freight distance and cost.
In additional logistical woes, recent rains have elevated water levels at NOLA to near flood stage, which could restrict vessel unloading to daylight hours at the U.S. Gulf. These had subsided by month's end, however, leaving the outlook for June urea once again dependent on global price movement in absence of much domestic activity to influence offer levels.
As mentioned above, India purchasing less urea in its May tenders than anticipated provided support to urea prices across the globe as China exporting less urea meant India would have to return with higher bids to secure its urea requirements for the current growing season.
In Egypt, a 30,000t sale closed books for June and in the Arab Gulf, a $385 FOB sale exhausted producers' availability for the upcoming month as well. As such, Egypt urea prices ended May at $380 to $393/mt FOB, up from April lows in the $350s mt range but still below March highs of $400. Brazil, meanwhile, closed the month at $415 to $420/mt CFR in a sharp increase from April's range of $355 to $375 as it needed to compete with India for available cargoes.
Unsurprisingly, the global conversation shifted to RCF India acceptances, as well as the size of the Chinese contribution to the session with some observers suggesting a modest RCF purchase would usher in another tender, further firing up price expectations on the suppliers' side. Global urea is firm in the short term with further direction determined by Chinese sales levels in June and July.
UAN saw further price increases in May as sidedress and top-dress application needs began to emerge in the Southern U.S., with alternating wet and dry conditions in the Corn Belt pushing the application window further into the season.
NOLA UAN was assessed unchanged from April at $300/t FOB, despite netbacks from river terminals indicating equivalent barge prices could rise $20 higher after CF raised prices twice in the past week.
CF raised its offers at main terminals Cincinnati, St. Louis and Mt. Vernon to $350/t FOB for UAN 32%, up $20 from $330 to $335 in April, but with short availabilities some buyers paid $5/t higher in main river markets where supplies were thin.
On the U.S. East Coast, UAN 32% imports were still at $310 to $315/mt CFR on flat sales levels from the past month and lower domestic tank prices.
Some in the market expected Oklahoma plant prices would fall in June, but as the spring season continued to stretch longer due to weather conditions and supply remaining short, no price decreases were reported at plants and levels remained around $340 to $350/t.
In the short term, U.S. UAN is expected to remain stable with the potential to firm on competition for available tons, with end season requirements expected to expire in June and fill announcements to follow in July.
With the primary summer fill window already ended in April and prices continuing to rise, phosphate buying has been slower in May as corn prices saw a streak of losses and higher input costs became a much greater concern. Relatively low U.S. supplies compared to fall needs continued to support phosphate prices.
NOLA DAP was assessed at $580 to $585/t FOB, $50 higher from April prices as tight supplies drove prices higher despite limited demand. NOLA MAP meanwhile is assessed at an even greater increase of $60 compared to April to $610 to $630/t FOB.
Terminal DAP volumes continue to rise alongside barges, reaching $620 to $655/t FOB, $15 to $30 higher from the previous month while MAP volumes rose to $650 to $675/t FOB, nearly twice the increase in DAP as the premium for MAP began to increase once again.
No more news reached the market for most of May regarding further action on countervailing duties against Moroccan and Russian origin product, but new developments in early June revealed that legal action continues. This is likely to prevent much Moroccan or Russian phosphates from reaching U.S. shores no matter how high prices soar, leaving our short-term outlook on phosphates firm.
Phosphate producers worldwide have solid orders booked for June, and many already have sales underway for July. Others are holding back from concluding potential new business at higher values for July into August shipment, confident of achieving higher prices the longer they wait given the market potential in major demand powerhouses in Asia and the Americas for Q3 shipment.
India DAP prices were largely steady in May, unchanged on the high end from April at $560 to $566/mt CFR on robust demand and some of its major producers undergoing turnaround. In Brazil the delivered MAP price range was much firmer in May to stay competitive, reaching $640 to $655/t CFR in moves $50 higher from April.
The global phosphate market is expected to remain generally stable to firm but with a strong freight market holding, the potential exists to temper netbacks in some regions.
Not only are prices moving higher due to concerns over potential sanctions against Belarusian potash, but an early announcement came from Mosaic that it would close two of its Canadian potash mines earlier than planned. NOLA granular potash barges were assessed at $353 to $365/t FOB, over $50 higher from April price levels following increases from summer fill reset and other firm trends in the wider market.
May began when Mosaic announced initial summer fill (May through September) offers at $365/t FOB river terminals and $370/t FOB Midwest inland terminal. Offers from Nutrien were in line with Mosaic's prices. At NOLA, potash barges were referenced at $330 to $335/t FOB for summer ship, but prices at the Gulf and in the U.S. interior both moved higher quickly through the rest of the month.
River terminal potash moved higher in tandem with NOLA barges to $385 to $395/t FOB, $40 higher from April lows.
All eyes will be toward the international market, however, as the Belarusian situation evolves and any governments who might enact sanctions against one of the largest exporters in the world. In North America, production increases announced by Nutrien in early June will partly offset lost production from Mosaic, while the latter resumes production at its Colonsay mine, which was idled in early 2020.
Editor's Note: This information was supplied courtesy of Fertecon, Agribusiness Intelligence, IHS Markit.
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