DTN Fertilizer Outlook

By Logan Garcia, Market Reporter - Fertecon, Agribusiness Intelligence, IHS Markit

The following is a recap of fertilizer price trends and market developments for December 2021.

AMMONIA

Domestic:

Iowa and Illinois continued to see some late-season ammonia applications as winter deliveries began to taper off into mid-December ahead of Christmas. Truck logistics also remained an obstacle for growers and ammonia sellers as truck driver shortages in the U.S. constrained deliveries during the peak fall/winter periods.

Aside from sustained applications in the Midwest, ammonia pricing largely remained flat in December. Corn Belt ammonia offers ranged from $1,350 to $1,395 per short ton (t) without transport costs (or FOB, free-on-board) -- or at the same levels seen in late November. Spring product had been previously priced at $1,355 to $1,365/t.

Prices in North Dakota, meanwhile, were as high as $1,575/t FOB from Beulah for spring volumes. CF was offering $1,470/t FOB in the state, while Nutrien posted a delivered price of $1,470/t.

Early in the month, the first winter fill offers were announced by Koch, including $1,350 to $1,375/t FOB in the Eastern Corn Belt (east from Illinois to Ohio) and $1,315/t for January and February pull from Enid, Oklahoma. Prices were later increased to $1,395/t FOB Corn Belt and $1,365 for March through Q2 2022 at Enid.

CF followed with its own announcements on Dec. 8, posted at $1,225 to $1,250/t at its Oklahoma plants for both January through February and March through June prepay. In the Northern Plains, North Dakota offers reached $1,450/t. Volumes in Minnesota were offered at $1,350/t.

In December 2020, CF was the first to announce its spring prepay at initial offers of $410 to $415/t in the central Corn Belt (Illinois and Missouri), $410 to $415 in the Eastern Corn Belt and North Dakota $430 to $440. Koch followed suit and issued offers in line with CF.

Overall, despite a slow period ahead of the holidays, ammonia prices appeared to remain supported and showed signs of continued strong pricing into early 2022.

International:

In another record-breaking month for ammonia prices, Yara and Mosaic agreed on a price of $1,115 per metric ton (mt) cost and freight included (or CFR) Tampa for January ammonia shipments from Trinidad -- the highest-ever settlement between the two companies, according to Fertecon's price history. This is an increase of $125 on the $990/mt CFR Tampa agreed by the parties for December and $845 on the $270 CFR Tampa that Yara and Mosaic agreed last January.

The large settlement at Tampa buoyed ammonia values across the globe, including in the Baltic Sea, which saw prices rise to $1,015/mt FOB by the end of the year, up from $820 in November. Black Sea ammonia prices also gained an extra digit to $1,010 to $1,115/mt FOB, approximately $300 higher from November values centered in the $700s.

The Fertecon price outlook for global ammonia is firm in the Western Hemisphere, supported by high gas prices, and stable to firm in the East.

UREA

Domestic:

December was mostly a quiet month on the urea front as the only activity came from U.S. Gulf traders for New Orleans, Louisiana, urea barges. Meanwhile, growers and retailers looked further ahead toward spring nitrogen requirements, but urea buying was not expected to pick up until later in 2022.

NOLA urea prices ended the year around the $760 to $770/t FOB mark, lower from monthly highs in the $780s and November trades up to $815. A flurry of trading activity was seen early in the month from a relatively smaller number of buyers and was attributed to a planned re-export vessel expected to load in January.

As mentioned above, most of the trading focus on urea has been on spring prepay. Since the urea bull run that began in September, purchasers have had little interest in buying prompt urea at prices that have tripled from December 2020.

Port Neal, CF's nitrogen plant is western Iowa, had completed its most recent turnaround in November and issued January-through-February pull offers of $900/t ex-plant.

Urea on the Mississippi River saw some softening values, particularly in the northern markets cut off from barging access where $860/t represented new high pricing, in line with November prices but down from $890 in early December. On the lower river, prices resettled in the $810 to $830/t FOB range at year's end, down $30 from the previous month.

Urea prices were expected to remain stronger in early 2022 on previously firm world prices but could be subject to higher volatility based on changes to trading fundamentals outside the U.S.

International:

The gap between relatively low prices in the U.S. and higher ones in the rest of the world remained wide enough in December that exports are still economically viable. However, the world market fell largely silent for the first half of the month ahead of the most recent India purchase tender, which resulted in satisfied producers at the end of the year and caused prices to slip somewhat.

Brazil was one of the major buyers who went silent in December and prices fell accordingly by $40 from November to $830 to $850/mt CFR on account of the slow market between crops. Prices in Egypt, meanwhile, jumped $15 higher to $935 to $960/mt FOB, but the prices soon proved to be unsustainable given softer market sentiments, and the exporter went quiet through Christmas.

India would end up IPL booking 1.18 million mt before the end of the year, which brought about softer market conditions with the country absorbing most available volumes. Natural gas price volatility and export curbs in several key supply markets, however, continue to provide some support to urea pricing. As a result, we see a gradual softening scenario likely for global urea in the short term.

UAN

December saw a round of 2022 prepay offers from CF Industries and a slowing nearby market as participants slowed buying to assess the impact of potential countervailing/antidumping duties to come.

Following prepay offers for anhydrous ammonia, CF announced UAN 32% prepay at initial offers of $590/t FOB for February through March pull at its Oklahoma production facilities. Tons from Donaldsonville were offered at $550 for January through February shipment and $565 for February through March.

On the Mississippi River, March offers for UAN 32% came out at $595/t Cincinnati and $590 at other river terminals, including St. Louis and Mount Vernon, Indiana.

NOLA barge prices for UAN moved up to $545/t FOB, in line with the spring offers and $5 higher from November lows.

December was also spent digesting news regarding the U.S. investigation into UAN from Russia and Trinidad, which hampered nearby buying interest during an already seasonally slow period. To recap, the U.S. Department of Commerce determined that UAN imports from Russia are "unfairly subsidized" at rates ranging from 9.66% to 9.84%, as well as UAN imports from Trinidad and Tobago at a rate of 1.83%.

Next developments in the countervailing case are expected by Jan. 26 when the department will make its preliminary ruling on antidumping rates for Trinidad and Russia.

In lieu of the CVD news, there were also no new spot sales from Russia to the U.S. East Coast, with indications unchanged from November at $660/mt CFR.

Russian export quotas and the ongoing U.S. government investigation are likely to keep prices high and restrict available imports, leaving our short-term assessment for UAN prices stable to firm.

PHOSPHATES

Domestic:

Overall, there was little domestic activity regarding U.S. phosphates to report in December as barge trade and terminal buying remained muted.

NOLA barge values ended December at $730 to $735/t FOB DAP and $760 MAP, about $10 lower from November trades given the slowdown on activity.

The premium between MAP and DAP, notably, also began to narrow from November in absence of much trading. Mosaic was offering both DAP and MAP for the same price from its Central Florida facilities via truck at $785/t.

Mississippi River terminals actually saw prices on DAP increase $20 from November lows to $765 to $790/t FOB while MAP prices fell by the same amount to $795 to $815 as a further sign of MAP beginning to lose some of its added premium over DAP.

Mosaic announced more positive sales news for November with phosphate sales volumes of 576,000 t, resulting in $465 million in revenues. Revenues were nearly 50% higher year-over-year compared to $312 million in November 2020 from sales volumes of 719,000 t.

Farmer groups including the Farm Family Action Alliance wrote in December in support of challenging the countervailing/anti-dumping duties imposed on Moroccan and Russian phosphates last year. An appeal is in the process, which could potentially prompt the U.S. agencies involved to review their affirmative decision on the duties. But the case is not expected to be resolved in the courts until later in the year.

For now, Fertecon leaves our short-term view on phosphate prices as stable to firmer on support from higher global prices despite a slow period in the U.S. market.

International:

The hike in global phosphate prices in the fourth quarter of 2021 was entirely due to the restrictions placed on Chinese exports from mid-October that have effectively put all exports of phosphate fertilizers on hold until further notice. This left markets regularly fed by China without their usual sources of supply and forced them to buy from nontraditional sources. In the absence of competition, these nontraditional suppliers were able to drive prices in Asia much higher in December.

Brazil MAP, for example, jumped $30 to $35/mt from November to $850 to $860, after moving up only $5 to $20 in the month before and despite slow phosphate demand in the country. India, meanwhile, saw a nearly $100 price gain as one of the aforementioned buyers scrambled to find volumes without China. Indian DAP prices thus ended the year at $895 to $900/mt CFR.

With the full effects of countervailing duties being felt in the U.S., combined with export caps and restrictions, 2021 was characterized by geopolitical forces rather than the forces of demand and supply in the phosphate market. Supply has been squeezed by these events alongside a more modest level of production in North Africa this year, leaving our global phosphate price outlook as firm to stable in the short term.

POTASH

December was a month heavy in news in the potash market despite the U.S. market having gone quiet to end the year, as seasonally typical.

Nutrien and Mosaic both unveiled January potash offers priced at $690/t FOB early in December. The companies specified that offers were not a formal fill program but were issued at a time that has traditionally been a period of refill buying for distributors and retailers in early December.

The first announcement came from Nutrien on Nov. 30 when the company posted new potash prices for January 2022 at $690/t FOB NOLA barge and $725/t FOB Midwest terminal. Nutrien said the offer was not a winter-fill program and new price postings could be withdrawn at any time. Nutrien also increased the premium attributed to its white (62% K2O) potash products to $20/t over red (60% K2O) grades.

Mosaic followed suit with its offers in line with Nutrien's price levels. Potash market participants said the prices, reflecting a $5/t NOLA increase, and well over $100 from the previous fall-fill buying period, did not attract large swaths of buyers with many buyers still purchasing hand-to-mouth and holding out for lower prices before spring.

The prompt NOLA barge market was assessed from $680 to $685/t FOB to end the year, mostly steady from the values seen from $680 to as high as $690 for both November and December.

River terminal potash offers also remained largely flat in December at $715 to $725/t FOB along open sections of the Mississippi, flat on the low end but $5 lower from November highs.

Dec. 7 was the deadline for U.S. companies to cease new business with Belaruskali, according to the U.S. Treasury Department, which first enacted sanctions on Aug. 9. Another round of sanctions was added on Dec. 2 against Belarusian Potash Company (BPC) and BPC subsidiary Agrorozkvit, granting U.S. companies the same 120-day grace period to wind down transactions.

BPC is the marketer for Belaruskali potash and is only 48% owned by the latter, so BPC escaped the first round of sanctions until this most recent announcement. Under the latest round of sanctions, U.S. companies appear able to wind down business with the BPC until April 1, 2022, when the 120-day grace period expires.

In the short term, we expect U.S. potash prices to remain stable with the potential to firm in Q1 if Belarusian potash supplies to the U.S. and wider market do dry up as the sanctions intend. Nutrien and Mosaic in their third-quarter results both reported improving production rates at North American mines targeted for the first quarter of 2022, which could potentially reduce additional pressure from the international market.

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

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