DTN Fertilizer Outlook

Domestic Wholesale Fertilizer Price Outlook Mixed Ahead of Summer Fill

New Orleans, Louisiana, (NOLA) urea prices were largely stable over the past month, trading up to as high as $260 per ton FOB in mid-June but subsequently falling to around $245 in early July, which is flat from the mid-$240s in late May. (Chart courtesy of Fertecon, Informa Agribusiness Intelligence)

Here is a breakdown of wholesale prices and trends of various fertilizers.

AMMONIA

International:

The global ammonia market is still looking for support, and with few turnarounds, cheap natural gas and little spot interest, it is still struggling to find a way forward.

Volumes from Yuzhnyy, Ukraine, may be down slightly, owing to turnarounds, but there is not any great demand out there that is searching for these metric tons. FOB (free on board -- the buyer pays for transportation of the goods) levels were last reported at $203 to $207 per metric ton (mt), down from $210 to $212 in early June.

The July Tampa contract was settled down $5 from June at $215 per mt CFR (cost and freight) -- the lowest price since September 2017. Weak phosphate prices and the disappointing U.S. market continue to take their toll.

Overall, the market still seems a little long, although there are reports of spot demand emerging from India. Whether this proves sufficient to trigger an increase remains to be seen.

Domestic:

Domestic ammonia prices reset for summer fill sales in June, and producers also came out with prices for fall prepay. Programs were announced separately for terminals west and east of the Mississippi River.

In the Western Corn Belt, CF took to the summer fill market first in early June, announcing offers for June shipment at $300 per short ton (t) FOB for its Iowa and Nebraska terminals -- as much as a $200 drop from prices at the end of the spring season, but in line with summer fill offers in 2018. Koch and other suppliers followed suit. Buyers were happy with the reset and stepped in to purchase accordingly. Most offers have since moved up by roughly $30 to $40 since then, bringing offers to $330 to $340/t FOB Nebraska and Iowa.

Ex-plant prices (price at the factory, not including any other charges, such as delivery or subsequent taxes) in Oklahoma were announced at $260/t FOB for June shipment but have since increased to $280.

Prices in the Eastern Corn Belt were not so quick to drop as producers tried to protect customers that had yet to use up their spring prepay tons priced in the low- to mid-$500s FOB. Koch eventually announced summer fill (third quarter shipment) late in June at $340/t FOB Illinois and Indiana, but CF came out a few days later at $330, and Koch, therefore, had to match. Again buyers seemed happy with the reset, and both producers have since retracted their initial offers and now prices stand at $340 to $350/t FOB.

For fall prepay, Koch came out first with offers at $365 to $385/t FOB Corn Belt, but CF came out a few days later offering $360. Koch decided to match this level, and buyers are reported to have stepped in for over half their requirements. Both producers retracted their offers and prices now stand at $370 to $390/t FOB Corn Belt for prepay. Buying has since turned off, but the market seems to have appreciated the reset.

CF matched Koch's ex-plant level in Oklahoma of $320/t for prepay.

Solid fall ammonia demand is generally expected. The corn crop will be smaller than once anticipated this year because of fewer planted acres and below-trend yield. This is expected to keep carryover tight and incentivize large plantings next year. Some industry participants have been saying corn-planted acres next spring could be as much as the mid- to upper-90 million acres, or even reach 100 million. On the other hand, the late-planted crop will likely mean a late harvest, which could shorten the application window this fall. But following the troubles getting into the field this spring, farmers will likely be motivated to do as much as possible this fall.

Meanwhile, sidedress applications are continuing across the Corn Belt as the late planting allows for a long tail to the ammonia season.

The domestic price outlook is stable to slightly firmer.

UREA

International:

Global urea prices edged higher in anticipation of another India tender in June, but there has been some uncertainty following the results of it.

India held its tender on July 1. Sudden offers of Chinese prilled urea in the mid-$270s FOB just prior to the tender led to offer levels coming in lower than expected at roughly $293 to $296 CFR, up just $10 to $13 from the last tender despite Arab Gulf spot prices reaching as high as $290 FOB in June. India managed to book a whopping 1.7 million metric tons at this level with up to 1 million of it thought to be coming from China. However, as the days have passed, it seems that not all of the metric tons traders thought available from China will be able to make it in time for India's shipping window, and therefore, there have been reports of traders looking to cover elsewhere, which may end up firming up international FOBs once again.

Meanwhile, outside of India, the India tender so far actually appears to be creating more of a price ceiling. There is little other demand to speak of and buyers seem unwilling to pay anything more than India. Brazilian CFR prices dropped to $277 to $285, compared to as high as $294 to $298 earlier in June.

While there is potential for some short-term firming if traders need to cover in for India, China certainly seems to be in a position to cap prices in the medium-term, especially with India not expected back with another tender for a while.

Domestic:

New Orleans, Louisiana, (NOLA) urea prices were largely stable over the past month, trading up to as high as $260/t FOB in mid-June but subsequently falling to around $245 in early July, which is flat from the mid-$240s in late May. Buying interest waned through the month as the window to move barges into the interior and make it in time for spring application closed. Traders are now looking at international price levels for direction.

There is talk of re-exports because of the relatively cheap barge prices compared to international values. But based on conversations with market participants, this does not seem very likely due to the position of most barges on the river as well as the price economics with interior premiums achievable in the domestic market still being more attractive.

There have also been concerns raised about the quality of the product in the barges that have been stranded on the river for weeks or months during heavy rain. Distributors assure that this will not be an issue, but some expect there will be more-than-usual off-spec product being offered this summer.

River terminal prices decreased as the river system finally opened up and in-season premiums faded. Prices are now around $290 to $295/t FOB at most locations, down about $20 from late May.

Ex-plant prices held mostly steady from early June with Enid, Oklahoma, still at $330/t and Port Neal, Iowa, at $320 to $325. Producers saw good sales due to the delayed river openings, allowing them to hold on to premiums later into the season.

OCI will be taking a turnaround at its Wever, Iowa, plant in July. The exact downtime is yet to be confirmed. Market sources expect it will be for at least two weeks, and possibly up to a month.

The domestic outlook is stable to soft as interior prices are expected to move down ahead of summer fill, and NOLA barge prices look to remain at a discount to international values.

UAN

Domestic:

UAN prices are seasonally softening ahead of summer fill. Although there has been good demand for the corn acres that were planted and the season has had a long tail, sellers have been willing to accept lower prices to make sure inventories are cleared out before summer fill UAN prices are announced. CF is expected to make its offers in mid-to-late June. Price expectations vary widely, but are generally not expected to stray too far away from last year's levels.

The NOLA barge market was quiet with activity focused at the terminal level. Price indications edged down $5 from last month to $160 to $165/t FOB.

CF decreased its terminal prices at St. Louis and Cincinnati by $20 to $210/t FOB for 32% and there have been reports of another $20 decline in early July.

The outlook for domestic UAN prices is soft heading into the summer fill period.

PHOSPHATES

International:

In a market near devoid of spot demand, phosphate prices came under further pressure. U.S. DAP/MAP prices fell to $337 to $353 FOB for export, compared to $352 to $359 in late May, as rising freight costs have contributed to lower netbacks.

Competitive offers for Moroccan DAP corrected to as low as $331 FOB, from a low of $355 in May, with OCP prioritizing volume over price as it sought to defend market share. Saudi Arabian metric tons were also placed in East Africa, which in contrast, was offering the best returns to these suppliers while their netbacks suffer on lower pricing in India where NFL had awarded its latest tender at $346 CFR, which compares to around $370 in late May.

One major development, however, has been the meeting of Chinese producers in early July where a curtailment in DAP production of 40% was discussed. However, the details have not yet been finalized with nothing firm agreed. Most would agree that a significant cutback is necessary to rebalance the market, especially for Chinese producers who are close to cash costs at the recent prices settled in India. However, increased discipline is needed in this industry to ensure that a planned curtailment is actually carried out. More often than not, such cutbacks are announced but do not always follow through as planned, despite the best intentions of some producers.

In the absence of additional production cutbacks, phosphate prices appear set for a further decline in the short term, but the majority of producers now have healthy line ups for the first half of July at least, so prices are not expected to collapse in the coming weeks.

Domestic:

The domestic phosphate market has been mostly quiet over the past month as market participants focused more on preparing for and taking vacation than trading fertilizers. The spring season is over for phosphates and summer fill business has gone quiet as buyers wait to see if high carryover and upcoming import cargoes will further pressure the market.

Indeed, the NOLA market came under renewed pressure over the past week with DAP and MAP trading down to $306 to $308/t FOB. Early in the June, Mosaic sold 15 DAP barges and eight MAP barges at a price of $320/t FOB for June/July shipment. The producer launched its fill program during the first week of June with an initial offer level at $330.

River terminal prices are settling into the $345-$355/t FOB range. MAP is usually priced on par with DAP. Wholesalers report little new interest in summer fill business. Most buyers are content to wait until at least late July before stepping up to the plate for the second round of fill.

The outlook for domestic phosphate prices is stable to slightly soft in the short term. Renewed buying interest should be supportive, considering good grain prices.

POTASH

North American potash producers announced summer fill programs in mid-June. Prices came in at $290/t FOB inland warehouse and $285 river terminal, which is about $40 lower from the last price increase, and $30 lower from where the market was when the spring season came to an end. Prices came in on the low end of expectations, which suggests high carryover is seen as a significant problem despite the recent increase in grain prices.

Indeed, although buyers were happy with the prices that were offered, volumes bought were down purely because of higher-than-average carryover.

Nutrien reported that customer's orders exceeded expectations and that it is effectively sold out through September. Good soybean and corn prices were cited for the bullish reaction.

Following the conclusion of the fill programs, Canadian producers increased the price for further granular purchases by $25, bringing values to around $315/t FOB inland warehouse and $310 river terminal. These values will not be tested until closer to the fall application season.

Meanwhile, potash barge prices softened with the latest prices reported at $248 to $255/t FOB. The spring season is essentially over, so this is the price level required to be competitive with summer fill offers from Canadian producers.

The outlook is stable for now, but some price increases are likely to be realized during the fall application season.

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

(BAS/AG)