DTN Fertilizer Outlook
Factors Driving Wholesale Potash Price Increases
The following is a breakdown of wholesale prices and trends of the various fertilizers for June and early July 2021.
AMMONIA
Domestic:
U.S. ammonia continued to see limited activity in June ahead of summer fill announcements, which eventually came at mid-month but were pulled almost as soon as they were announced. Fall prepay offers would later follow in July.
Initial offers from CF and Koch reportedly took place over a two-hour window at a range of $560 to $585 per short ton (t) free on board (FOB) Corn Belt, $540 in Kansas and $550 to $565 Nebraska. Eastern Oklahoma plants saw fill offers at $560/t FOB while prices at the high end of the Corn Belt range came from Port Neal in Iowa at $585.
Port Neal was set to begin seven to eight weeks of turnaround at the end of the week. In June and July, several major nitrogen plant turnarounds are also scheduled. Enid in Oklahoma, OCI Wever in Iowa and Donaldsonville in Louisiana are among plants with some periods of downtime over the past month.
The NuStar ammonia pipeline was also scheduled to undergo maintenance beginning in July, further straining already slim supplies due to the many simultaneous turnarounds.
With plant turnarounds, a higher Tampa settlement as well as a firming global market, U.S. ammonia has plenty of price support in the short term, which puzzled some as to why summer fill offers released at a $50 discount to in-season prices.
International:
Yara and Mosaic agreed to a price of $585 CFR Tampa for July shipments. This represents an increase of $50 on the $535 per metric ton (mt) cost and freight (CFR) Yara and Mosaic agreed to for June shipments. It is also the highest settlement at Tampa since December 2014, when Yara and Mosaic agreed to a price of $625 CFR.
The increase at Tampa for July can be attributed to a range of factors, including the recent firming in prices globally, maintenance at a number of plants in the U.S., the turnaround at one of Nutrien's plants in Trinidad, and the recent flow of ammonia from west to east to plug the void left by Ma'aden's recent outage in Saudi Arabia. The situation at Ma'aden's 1.1 million-tons-per-year MPC ammonia plant remains unclear. The outage could last from anywhere between late July to September.
With Tampa settled for July, talk has turned to the Baltic, where Yara's Russian contract suppliers are understood to be seeking prices at least on a par with current Black Sea levels of $525 to $530/mt FOB, which would be $100 higher month over month and would reflect global tightness. The previous Baltic ammonia monthly contract closed at $425 to $435/mt FOB in May.
Our outlook regarding global ammonia remains firm into July.
UREA
Domestic:
The urea market in June appeared mostly responsive to global fundamentals as the domestic season wound down in some areas and paused in others where dry conditions prevailed in parts of the Corn Belt and Northern Plains.
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NOLA (New Orleans) urea was assessed at $414 to $430/t FOB for prompt through 30-days-forward barge ship at the end of June, $30 higher from end of May levels but weaker from July highs at $455/t FOB. The weaker June finish was due to the market awaiting the results of India's latest urea tender for further market direction with the domestic season nearly complete. Loaded barges were said to have traded from $430 to $455 in the same week compared to $463 trading the prior week before softness set into the market.
River terminal urea volumes rose to $480 to $510/t FOB, $60 higher from May levels as both NOLA and inland markets received support from India's repeated disappointing urea tenders, which brought to light the reluctance for Chinese urea exports and thus some firmer market sentiment.
More imports are expected to arrive in July 2021 than in the previous year, which may weigh on prices ahead of any fall prepay offers and urea values in general during July and August. Further support could come from the international market, however, as India continues to issue urea tenders to fill growing domestic needs.
International:
Several new developments emerged on the global urea landscape in June. In Africa, both Ethiopia and Tanzania closed import tenders at the end of the month, adding fuel to an already blazing bullish sentiment and raising questions of supply availability given the overlap with India's tender delivery window. Nigeria's long-in-development Dangote urea plant reportedly sending its first cargo to the U.S. also caused small ripples in the market.
Egypt ended June with prices at $450 to $460/mt FOB, up from $380 to $393 at the end of May. Brazil prices, meanwhile, closed proportionally higher to Egypt at $485 to $495/mt CFR, up $70 from May lows as buying competition heated up in June.
Many see no end to the current bull run on global urea through Q3 and even into Q4, betting that strong Indian appetite for tons during the Kharif crop season will capture volumes from exporters in the Arab Gulf, which will then motivate buyers elsewhere to increase their bids. Our global urea outlook remains bullish in the short term.
UAN:
UAN barges at the U.S. Gulf continued to see little prompt interest in the physical market in June, with our price assessment having moved $10 higher from the previous month at $300 to $310/t FOB NOLA. Demand overall has been somewhat weak in the U.S. in the prior two weeks with dry weather in the northern and Western Corn Belt affecting growing conditions. Along the East Coast and in the South, where side and top dress continued, there was some movement, however.
Most in the market continue to eagerly await UAN summer fill, with Koch and CF having released ammonia fill offers at cheaper than expected prices - $50 discount to in-season prices. Summer 2021 fill prices are expected to far surpass last year's fill levels of $150 to $152/t FOB river terminal, with speculation from market participants putting levels from $270 to $330/t.
Main river terminals in St. Louis, Cincinnati and Mt. Vernon remained at a range of $350 to $355/t FOB in June after prices increased $20 in May from initial spring offers of $325 to $330/t.
The U.S. East Coast saw little activity in June with no changes in May pricing levels of $310-315/t FOB. Alongside summer fill, the other hot topic in the market was reaction to a U.S. antidumping investigation and CF's July petition to the U.S. Department of Commerce.
With the antidumping investigation in its preliminary stages, the outlook for U.S. UAN remains uncertain but is likely to firm if imports from Trinidad and Russia, which account for most U.S. imports in recent months, dry up with the government investigation under way.
PHOSPHATES
Domestic:
DAP and MAP barge trade on the whole slowed in June, with most pre-plant phosphate applications having finished earlier this spring and the market's focus turning to summer fill on nitrogen fertilizers.
Early in the month, Mosaic revised its offer for summer fill phosphate barges (June through September shipment) to $590/t FOB NOLA DAP and $630/t FOB NOLA MAP. By the end of June, however, DAP prices would surpass the $600 mark and finish the month at $615 to $620/t FOB. MAP rose to $650 to $655, with tighter DAP supplies having reduced liquidity in recent weeks. May ended with DAP prices at $580 to $585/t FOB NOLA and MAP at $610 to $630.
River terminal DAP business rose in line with NOLA barge values to $645 to $660/t FOB DAP, up from $620 to $655 in May. MAP prices increased to $685 to $690/t FOB on tight supplies compared to $650 to $675/t FOB in the month prior.
A steady flow of imports from exporters in Jordan, Tunisia and Australia continue to partially fill the trade vacuum left by Moroccan and Russian phosphates since countervailing duties were imposed earlier this year. Over the next two months, which are expected to remain slow ahead of fall buying, steady imports may be able to catch up to demand and reduce some of price pressure seen in the past year.
International:
Phosphate prices are firm worldwide, with producers taking advantage of robust demand and strong order books. The rise in FOB prices comes despite the strength of the freight market, highlighting the tight supply position, with producers easily passing on rising costs to buyers. Movements in freight rates will continue to influence the strength of pricing.
Declining corn and soybean prices and the absence of granular potash offers in both North and South America are also discouraging phosphate purchases by blenders and farmers. Chinese export offers also pulled back in June, which contributed to further strength in the global phosphate market.
India DAP prices rose to $590/mt CFR, an increase of $30 from May levels, while in Brazil the MAP range jumped nearly $100 in competition for tons and reached $750 to $755/mt CFR despite slower sales volumes due to blending disruptions.
Prices look set to continue their upward trend in the coming weeks, spearheaded by Latin American demand and with a large amount of business already on the books.
POTASH:
In June, the market's expectation of penalties against Belarusian potash became official when the EU imposed wide-ranging new sanctions on additional government officials and entities as President Alexander Lukashenko's regime ratcheted up its pressure on high-profile dissidents. In a joint statement, the EU, UK, U.S. and Canada announced coordinated sanctions and called for certain measures including the immediate release of all political prisoners.
Potash prices continued to climb through June as the situation in Belarus evolved, rising to $495/t FOB NOLA, nearly $150 higher than May. Volumes along the Mississippi River rose in step with NOLA to well over $500/t to $525 $540, price levels which destroyed much end-user demand given the late period in the season and nearly two months after the first summer fill offers. Supplies were equally tight with some importer plans disrupted and fewer sellers willing to make offers in an uncertain market.
With sanctions continuing into July, U.S. potash prices are firm in the short term with many still yet to meet their fall nutrient requirements and an unsteady supply situation internationally driving concerns over availabilities later in the year. However, high prices for prepay and fill before P&K applications later in the year may cause typically early buyers to wait for lower prices that could emerge if sanctions are lifted on Belarus or when Nutrien and Mosaic increase North American mine production, which both have indicated they are working toward.
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Editor's Note: This information was supplied courtesy of Fertecon, Agribusiness Intelligence, IHS Markit.
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