DTN Fertilizer Outlook
Domestic Wholesale Prices Seen Lower in Short Term
The following is a breakdown of wholesale prices and trends for various fertilizers.
AMMONIA
International:
Global ammonia prices turned downward in November with pressure stemming from softer downstream markets. Leading the way was the Tampa, Florida, CFR (cost and freight) contract for December, which settled down $30 from November to $325 per metric ton (mt) CFR. A poor domestic fall direct application season and weaker DAP prices helped Mosaic secure this significant reduction over November.
India also saw lower prices. India-based Fertilizers and Chemicals Travancore Limited (FACT) held multiple import tenders during the month with the most recent award for 7,500 mt made at $350 per mt CFR Cochin Port, India, down $35 from the end October.
Yuzhnyy, Ukraine, is still a mess, with delays in the Turkish Straits creating a tough situation both in terms of meeting contract deadlines and facing increasing costs as vessels more than double their journey time. No new spot sales have been made due to the transit uncertainty. Spot prices were assessed at a lower $310 to $330 per mt FOB (free on board -- the buyer pays for transportation of the goods), compared to $345 to $355 in late October. However, the squeeze in supply here appears to be doing nothing to reverse the trend seen elsewhere in the world.
The price outlook is weak in the short term with softness expected to continue in downstream markets.
Domestic:
The major news from the countryside was the continued lack of progress in the fall direct ammonia application season over the last month. With snow covering the Plains, frozen ground in the north, and more rain in the Corn Belt, many end users were unable to apply as much ammonia as they planned. Midwest wholesalers are reporting 10% to 50% disappearance so far this year compared to an average season, and some market participants are calling it the worst fall application season ever.
Producers are understood to be canceling all outstanding 2018 fall prepay contracts with customers on Dec. 31 if the volumes are not able to be used by then. This essentially means buyers will have to repurchase these tons at a higher price if they still want them.
This development has had little effect on the prompt market with suppliers increasing offers to $475 to $495 per ton (t) FOB in the Corn Belt and $400 to $420 in the Southern Plains despite non-existent prompt demand.
The dismal fall application season has had more of an impact on the spring prepay market. Given decent weather, end-user consumption this spring is likely to be very strong in a relatively short timeframe and there is concern the supply pipeline will not be able to service all this demand. Due to this, producers are pushing for higher prices for spring despite large carryover and a $30 drop in the December Tampa contract.
Offers for spring prepay were announced in the low $500s FOB Corn Belt and mid-$420s FOB Southern Plains. Some large retailers/co-ops are reported to have bought all that producers were willing to allocate them. However, smaller independent dealers and traders are sceptical these higher values will hold until spring, citing potential containment issues and the relatively weak price of corn, and have decided to pass on these initial offers.
For now it seems domestic ammonia prices, at least for spring prepay, are supported, considering the buying support seen so far. However, there does appear to be significant downside risk of containment issues this winter, considering the high level of inventory carryover and a weakening international market. There may be a strong push for exports to combat this, but so far, no new sales have been reported.
The outlook is bearish for prompt prices but stable for prepay, at least in the short term.
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UREA
International:
Urea prices continued downward in November, despite India purchasing 1.8 million metric tons in its latest tender against expectations of only 1 mmt. Lack of demand in regions outside of India has put suppliers in a tough position with their sales books to year-end. This was highlighted in the India tender when 3.6 mmt were put on offer. Now, with India thought to be comfortable through 2018 and early first quarter 2019, prices in other markets are under pressure, especially in Brazil.
Last sales in Brazil were $305 to $310 per mt CFR, down $25 from late October. There were reports of good activity on the domestic market, which could suggest further movement ahead of the Safrinha season. However, it seems even if Brazil starts running well, a lack of demand elsewhere in the Americas will likely continue to weigh on urea prices.
The short-term outlook is soft with import demand expected to be slow in several key markets.
Domestic:
New Orleans, Louisiana, (NOLA) prices continued trending lower over the last month with barges recently concluded at $271 to $276/t FOB, compared to $310 to $325 in early November. Prices continue to be pressured by the arrival of spot imports, while interior demand remains seasonally slow, compounded by increased domestic output.
Higher levels achieved in the spring prepay market for ammonia ($505 to $525/t FOB Corn Belt) are viewed as mildly supportive for urea. It also seems likely that more spring nitrogen needs will have to be met by applying urea during sidedress, considering the fall direct application season for ammonia was one of the worst on record.
River terminal prices softened to around $315 to $325/t FOB, down about $15 to $20 from November. Wholesalers report a few buyers stepping in for small players at this level, but for the most part, interest remains limited.
N-7/OCI reports to be increasing DEF and UAN production at Wever, Iowa, and essentially halting urea production due to the currently unfavorable urea price level.
The price outlook is slightly soft due to seasonally slow demand domestically combined with a weakening international market. However, considering NOLA is relatively undervalued compared to other destination markets and inventories for spring will soon start needing to be built, the bottom may not be far away.
UAN
Domestic UAN prices were generally steady during November. At NOLA, UAN barge prices are up slightly from last month, $220 to $225/t FOB, but are down from the highs seen mid-month at $225 to $230/t FOB. River terminal 32% prices remain around $250 to $255/t FOB for fourth-quarter shipment.
CF has yet to announce spring prepay offers, but the producer did come out with December-Q1 pricing recently. Ex-plant values (the price at the factory, not including any other charges, such as delivery or subsequent taxes) for 32% were $255/t Iowa and $245 to $250 Oklahoma. These prices were in line with market expectations. Buyers have not yet been interested, considering seasonally slow retail demand for the timeframe offered.
N-7/OCI reports to be increasing DEF and UAN production at Wever, Iowa, and essentially halting urea production due to the currently unfavorable urea price level.
The price outlook for UAN remains soft, considering urea is relatively cheap and the fact producers have yet to make much of a dent in 2019 UAN sales.
PHOSPHATES
International:
Global phosphate prices were a mixed bag in November with some suppliers able to hold onto values despite limited business while others were under pressure as they looked to place metric tons.
Saudi Arabian suppliers have kept DAP moving into India where they have joined Chinese suppliers in agreeing to the low $420s CFR per mt for December shipments, compared to $426 to $427 in late October.
U.S. and Russian DAP/MAP prices have suffered owing to weak demand west of Suez. NOLA DAP and MAP barges values have sunk to $400/t FOB and $407 to $410, off around $20 from October, respectively, while Russian MAP has traded down $5 to $10 from late October to $445 CFR Brazil.
Most producers and some traders have gone long in recent weeks and still need to find a home for their December positions and output. That, combined with falling raw material costs, is keeping the short-term outlook for phosphate prices soft.
Domestic:
Larger-than-expected inventory carryover resulting from a below-average fall application season continues to weigh on domestic phosphate prices. NOLA barge prices began December with DAP trading at $393 to $395/t FOB and MAP at $400 to $402, down from $417 and $421 to $425 in late October.
River terminal prompt markets were quiet with steady but slow application activity witnessed across the Midwest. A late harvest and subpar application conditions continue to limit movement to the field. Midwest distributors generally report fall sales between 80% to 100% compared to a normal season. Prices are falling with most terminals now quoting around $425 to $435/t FOB for DAP and $435 to $445 for MAP, each down $20 from late October.
Mosaic sold multiple barges at $395/t FOB NOLA for DAP and $400 for MAP, and subsequently launched its winter fill program in early December at $405/t FOB for DAP and $410 for MAP for December shipment. Forward offers are showing a carry. Wholesalers report buyer interest in winter fill tons, but expectations are for reduced volumes this year due to larger-than-expected inventory carryover.
The short-term outlook for DAP/MAP barge prices is slightly soft with a weak international market expected to weigh on the NOLA market.
POTASH
There was little change in the domestic potash market in November, as most of the market focused on fill programs for ammonia, UAN and phosphate. Prices are steady from late October with NOLA barges at $285 to $290/t FOB and river terminals around $305 to $315. Limited prompt demand has emerged as subpar application conditions continue to limit movement to the field. Most buying is for winter fill. Producers are not expected to announce a formal program, or lower prices, so dealers are stepping in at today's values to fill inventories for spring.
The outlook for potash prices continues to be stable-to-firm basis tight supply relative to demand.
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Editor's Note: This information was supplied courtesy of Fertecon, Informa Agribusiness Intelligence.
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