DTN Fertilizer Outlook

Spring Weather, Coronavirus Add Uncertainty to Fertilizer Price Outlook

Prices for UAN32 at CF's river terminals in St. Louis and Cincinnati remained the same throughout February between $150 and $160 per ton FOB. (Chart courtesy of Fertecon, Agribusiness Intelligence, IHS Markit)

Agribusiness Intelligence, IHS Markit

The following is a breakdown of wholesale prices and trends of the various fertilizers in the month of December into the first week of January.

AMMONIA

Domestic:

February tends to be a slow month for ammonia, as much of the U.S. typically sees the wettest, most wintry conditions of the season. This year was no exception.

The Palmer Drought Severity Index, a monthly measurement of soil moisture released by NOAA, showed that February 2020 was one of the wettest of the last century, second only to last February. USDA lowered its expectations of corn-plantedacres by 500,000 acres to 94 million acres in February, which is still higher than last year but less bullish than its earlier projections.

At the end of February, ammonia application was reported to be getting started in spotty areas across west Texas and eastern Oklahoma. However, widespread runs are likely still weeks away. Much of the U.S. is still waiting to dry out before starting pre-planting applications.

Prompt prices in the Corn Belt were $320-$350 per short ton (t) free on board (FOB), mostly flat from $330-$350 in January. Prices were consistent across the region both east and west of the Mississippi, as the vast majority of any sales were on prepay tons.

The outlook for U.S. ammonia coming out of a flat beginning to the year is flat to firm as planting season and ammonia demand ramps up. Movement last fall was limited by the weather, so logistics are expected to be stretched this spring, which should be supportive of ammonia prices.

International:

International ammonia prices were also flat in January as many perceive the market to be oversupplied and lacking any clear direction upward. Concerns rose in February that the coronavirus would create further cutbacks in downstream fertilizer and chemical production in China, which would reduce ammonia import demand.

Yara and Mosaic rolled over the Tampa ammonia contract price at $250 per metric ton (mt) cost and freight (CFR) for March. This is the third-consecutive month of price rollovers since December when Mosaic announced it would cut phosphate production in the U.S. due to low prices and demand. No ammonia was moved under the contract through the first two months of this year as a result.

Yara also reached a partial agreement for its Baltic price at $218-$220 FOB for March, down slightly from February's partial agreement at $220 FOB. Yuzhnyy, Ukraine, spot prices ended the month at $220-$225 FOB, which is up slightly from $220-$223 at the beginning of February.

Now the global market watches the U.S., hoping a good spring will help to boost the market. Good movement here and a slow return to normality in China could help, but plenty of supply is likely to keep ammonia prices flat in the coming month.

UREA

Domestic:

Urea prices saw a fast rise throughout February as imports remained far behind schedule compared to last year. While rising prices helped to eventually attract the overseas product needed to fill spring demand, the barges that were available in February and early March fetched higher prices, as most new import bookings are not anticipated to arrive until April or later.

New Orleans, Louisiana, (NOLA) urea prices ended January at $209-$215/t FOB, and by the end of February, prices reached $243-$251/t FOB and rocketed higher by $20 yet in early March.

Terminal prices along open sections of the Mississippi River were up from $245-$255 at the beginning of February to $275-$295 at the end of the month. Along closed sections of the river, prices were up as well but to a lesser degree. Northern markets still have time to buy for spring needs, with urea in the Twin Cities up $10 from $275-$280 to $285-$290.

Factory ex-plant prices (the price at the factory, not including any other charges, such as delivery or subsequent taxes) for February were up in Enid, Oklahoma, and Port Neal, Iowa, from $250 and $255, respectively, to $300 for both locations at the end of the month.

Depending on when spring demand sets in, and whether or not supply can keep up with that demand, urea prices may see continued price hikes in the near future.

International:

The U.S. led a global rise in urea in February, also supported by demand from Australia and Latin America.

Egypt FOB prices rose from $240/mt FOB to $255-$258 in February. The Brazil CFR price also ended the month higher at $255-$265/mt CFR from $245.

In China, the domestic spring plowing season kicked off and pushed domestic prices higher than those achievable for producers in the export market. Fewer exports have been seen out of China as a result, which has been supportive for international price levels.

The outlook for global urea appears stable to firm going forward, with China mostly out of the export market in the short term. Another sign of price strength in the market is an expected tender from India in late March or early April.

UAN

UAN suffered another month of winter inactivity in February as field conditions across most of the U.S. remained seasonally cold and exceptionally wet.

Barge prices for 32% UAN at NOLA ended January around $120-$125/t FOB and returned to those levels for the end of February. A barge reportedly sold at $110 in mid-February and brought down market prices before lower offers dried up and returned to earlier levels.

The sale coincided with the annual TFI conference in Palm Springs where UAN and its exceptional affordability per unit of nitrogen dominated the conversation. Attendees were split on whether or not UAN prices could get even lower; however, prices would get stronger for the remainder of the month on the support brought by urea and its tight import supply schedule.

Prices at CF's river terminals in St. Louis and Cincinnati remained the same throughout February between $150 and $160/t FOB. However, CF pulled its posted prices for second-quarter UAN at the end of February, likely in an effort to move prompt tons before the season kicks off. No replacement prices had been posted at the time of this writing.

Coinciding with low activity throughout the U.S. market as a whole, East Coast CFR prices remained at $145/mt in February.

As UAN prices are closely linked to urea, prices should start to rise if urea imports can hold at current levels, especially when spring demand is at its peak.

PHOSPHATES

Domestic:

Ammonium phosphates showed signs of stability in February as the price hike observed in January tapered off and DAP and MAP remained in the $270s and $280s/t FOB at NOLA. Last month also saw major producers restore production cutbacks that were announced at the end of 2019, apparently content with the market's recovery since December.

Mosaic restored production at its central Florida facilities at the end of February, which had been idle for roughly two months. Producers in Morocco also began exporting at full capacity during the same window; however, this lapse of supply was due to seasonally stormy conditions at their ports rather than purely economic concerns.

Prices at NOLA had been sitting at $275-$280/t FOB on both DAP and MAP at the start of February. But by the end of the month, heavier imported proportions of DAP served to restore the price premium on MAP. DAP prices ended February at $276-$280/t FOB after rising to the $280s and falling back down while MAP stabilized higher at $281-$285.

On the river, terminal prices along open sections ended the month with tighter pricing between the two products. DAP rose to $310 in Tulsa from $295-$305/t FOB but fell in Cincinnati to $305-$312 from $320-$325, whereas MAP gained $5 in Tulsa to $310-$315 but moved in tandem with DAP prices in Cincinnati. On the closed river, prices moved up $5 on both products from $315 to $320/t FOB Twin Cities.

Fertecon's outlook on ammonium phosphates is uncertain due to the increasing international impact of the COVID-19 coronavirus outbreak.

International:

Phosphates are possibly the fertilizer products most immediately affected by the global outbreak of the COVID-19 coronavirus. The outbreak started in Hubei Province, China, which is a major center of phosphate production in the country with almost 50% of China's production capacity centered in the region.

Consequently, a large portion of the ammonium phosphate production facilities in China were shut down for much of February. Factories are only beginning to restart now in anticipation to meet Chinese domestic demand, with the full impact to the international market unclear as the outbreak continues.

Other international markets reacted positively to the China situation initially, with bullish movement trending globally. The Brazil MAP price rose in February from $310 to $330/mt CFR. The India DAP price also rose by $20, from $290 to $310/mt CFR.

The big question in the international market will be exactly what magnitude this will have on China's exports for 2020, and who will step in to fill that market. Overall, producers will be content with good demand from major markets like Russia, the U.S. and Brazil, as well as a rise in demand from eastern markets.

POTASH

Coming back down from activity kick started by the Nutrien fill in January, potash saw mostly stable prices throughout February. Record-wet soil conditions in the Corn Belt continuing from December means fieldwork is limited to areas of the Southern Plains. That, coupled with high inventories, meant a quiet month for potash buying and application.

At New Orleans, barge prices remained flat through the month at $210-$215/t FOB, slightly softer than the range of $213-$215 we reported for January. Prices at terminals along open sections of the river were largely flat or slightly softer; Tulsa pricing was flat through the month at $245/t FOB while St. Louis fell by $10 to $240-$250 from $250-$255. On the closed river, Twin Cities pricing was flat at $260-$265/t FOB for February.

China's potash contract has not yet been settled due to the coronavirus outbreak, and with high volumes both in China and the U.S., it appears that potash largely stayed out of the spotlight for February.

A good spring application will be needed to clear inventories in turn for the next round of purchasing to be successful. A late spring would be obviously bearish for potash; however, producers have been fairly disciplined in keeping the market properly supplied and cutting production where necessary. The outlook for potash is stable to soft in the short-term until spring demand ramps up.

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

(AG/SK)