DTN Fertilizer Outlook

Cold Weather Likely to Cut Into Preplant Volumes

(Photo courtesy of Russ Quinn)

The following is a breakdown of international and domestic wholesale prices and trends for various fertilizers.

AMMONIA

International: The international ammonia price climb ceased at the end of April, with ammonia markets showing clear signs that bearish sentiment now prevails across the board.

Improved availability from the Black Sea with good product flow from the TogliattiAzot plant to the port of Yuzhnyy during April, as well as the restart of the OPZ plant in Ukraine, started to ease the supply tightness that had pushed prices up earlier in the year. Export tons fob Yuzhnyy are currently priced at $300 to $320 metric ton, down from $310 to $330/mt at the end of March.

Spot volume remained limited in the Middle East as the Qafco 6 ammonia/urea plants in Qatar were offline during most of April. It looks like most of May production will be needed to fulfill contracts, so spot supply will likely remain thin. Prices for spot and contract tons out of the Middle East are indicated at $345 to $370/mt, down from $328 to $400/mt at the end of March.

Reduced output from Sorfert in Algeria has not stopped the downward pressure on prices and the eventual resumption of production could speed up the price fall.

Demand was broadly stable from India and the Far East during April. However, pressure on ammonia prices is emerging from caprolactam producers as caprolactum prices are now weakening in Asia and the United States.

In the United States, Yara and Mosaic agreed on the contract price for May deliveries of ammonia into Tampa at $330/mt cfr, a $10 decrease from the $340 cfr price for April.

Overall, the short-term outlook for global ammonia prices is softer.

Domestic: Anhydrous preplant application has been spotty with intermittent rains preventing many farmers from carrying out a sustained run. Prices in all regions saw seasonal decreases through the month as the traditional preplant season nears its end.

Ammonia application activity in the Eastern Corn Belt picked up in late April. Dealers in Ohio and Indiana reported steady volumes of anhydrous being applied, mostly ahead of corn planting. Despite seeing improved end-user demand, prices in Ohio and Indiana dipped down to $400 to $405 per short ton fob from $450 to $465/st last month. Wholesalers reported surplus tons from wet areas further west being trucked east at competitive delivered prices.

In central Illinois, rain and cold weather stymied hopes of another big preplant run. In Illinois and Iowa, prices were reported at $385 to $415/st fob, down from $435 to $455/st at the end of March. OCI's new ammonia plant in Wever, Iowa (see below for more plant details), has been trucking out tons consistently and taking delivered sales with prices equating to around $390/st fob.

Strong ammonia demand was seen in the Midsouth for corn preplant. However, application activity was much slower by the end of the month due to rain. Prices in Memphis were down $20 from last month to $380/st fob and Mt. Vernon, Indiana, softened $35 to $40 to $415 to $420/st fob, as sellers began to compete over the last preplant sales.

In the Northern Plains, persistent rain and cold weather is likely to cut into preplant volumes in many areas. More volumes are expected to go down as sidedress. Northern Plains prices, albeit the cheapest in Midwest, have been relatively steady from last month with delivered quotes into North Dakota around $385 to $390/st and fob values in western Minnesota at $385/st.

In the Southern Plains, fob list prices from production points in Oklahoma dropped $40 from last month to $365 to $375/st. Traders have been looking to liquidate their positions now that preplant application is over, and prices are expected to see a heavy reset this summer. Tons off the pipeline are being trucked north into Kansas and Nebraska with prices around $370/st, netting back much lower fob values than the fob production point list prices.

Texas was not safe from the rain. Central Texas and areas along the Gulf Coast were wet for periods of the month. Row-crop application is winding down for the most part, but farmers are doing some pasture work.

OCI's subsidiary Iowa Fertilizer Company announced that production has officially started at its new Wever plant in southeast Iowa. The plant has around 726,000 tons per year ammonia capacity, but the vast proportion of the ammonia output is expected to be used downstream on-site for urea and UAN with an estimated merchant ammonia surplus of just around 120,000 t/y. At the same time, the commissioning of the new urea plant by Agrium at Borger, Texas, will lead to a reduction of merchant ammonia supply by around 350,000 t/y.

The outlook for domestic ammonia prices is soft. Prices are expected to adjust downward in the upcoming weeks for side-dress application. New production coming online at Wever and reports of domestic producers cutting urea production in favor of ammonia has added to the bearish outlook for summer fill prices.

UREA

International: The international urea market saw further price softening in a month where demand levels in Europe, the U.S. and Brazil were all very slow.

North Africa fob values decreased $25 from last month down to $195 to $205/mt by the end of April. Little interest for new tons in Europe continued to weigh on North Africa fob values. Drought conditions in some parts of Spain and France are expected to affect corn acreage, and this as well as the expectation for lower prices, is leaving importers hesitant to buy tons.

Brazilian buyers also kept on the sidelines, which is usual for this time of the year, when the focus is more on P&K. Recent high import numbers also suggest there is plenty of urea available locally.

Middle East fob declined to $160 to $200/mt, down $10 from a month ago, with sales to the U.S. accounting for the low end of netbacks at $160 to $170/mt fob. India tendered twice in quick succession in mid-April, booking around 1 million mt in a range of $221 to $231 cfr, supporting Middle East netbacks in the $210 to $220/mt fob range. Middle East fob values held relatively stable through the rest of April as producers looked relatively more comfortable owing to recent turnarounds and vessels committed to India.

In China, a rebound on the domestic market prompted sellers to increase prices late in the month, but it will be difficult for granular urea producers to keep prices stable in the current climate. Chinese urea export prices were around $205 to $210/mt fob at the end of April, down from $220 to $230/mt in March.

In Yuzhnyy, OPZ has indeed now switched off its remaining prilled urea line on the back of low prices. This is, however, expected to have little impact on Yuzhnyy prices as demand from the domestic market is slowing down, while on the export market, sellers of Yuzhnyy product face Egyptian competition in Turkey and Europe.

The outlook for international urea prices is soft.

Domestic: Domestic urea prices were down $10 to $15 from last month as rain kept application work in key areas of the Corn Belt slow. Spotty application due to rain has given ample time to distributors to reload inventories before any short-term tightness occurs. Pricing is generally becoming more competitive as traders/distributors lose hope for any rally in the short-term and are looking to liquidate positions.

Corn Belt wholesalers generally report moderate movement to dealers, but new demand along the distribution chain has yet to be picked up. Application has not progressed as quickly as many hoped, and that, combined with added domestic production, is heavily weighing on urea prices.

NOLA urea barges ended April with light trading in the range of $174 to $178/st fob, down from $184 to $192/st at the end of March. Throughout the month, NOLA barge prices bounced around in the $170 to $200/st range, even trading as high as $204/st in early April. However, by the end of April offers had fallen to sub $170/st, showing further softening is likely.

Truck prices out of the major river terminals are at $210 to $220/st fob, down from $220 to $245/st at the end of March. Tulsa prices are the most competitive at $210 to $215/st, while the Twin Cities, St Louis, and Cincinnati markets were all in the $215 to $220/st range.

Wholesalers in the Eastern Corn Belt reported increased volumes making their way to dealers. Urea application for corn and planting in Ohio and Indiana has been ramping up. Truck prices at inland warehouses in Ohio were down $15 from last month to $250 to $255/st fob. Prices on the Ohio River are becoming increasingly aggressive with offers at $210 to $215/st fob from Cincinnati and Evansville.

Activity in Illinois and Iowa has been slower due to rain and cold weather. Corn planting is behind the five-year average. Wholesalers reported few sales and light volumes moving to dealers. Prices from river terminals are around $220 to $225/st fob, down from $230/st in March, and seeing very little interest. Traders reported aggressive delivered pricing from CF's Port Neal facility equating to $215/st fob. This has kept import tons from being competitive in areas like South Dakota, which in previous years, was being supplied with tons off the river.

East Coast urea prices are down $5 to $10 from last month at $255 to $270/st fob. Activity at the warehouses started to pick up towards the end of the month as many dealers worked their way through old purchases and started making a few new purchases.

Prilled urea barges for May delivery traded at $200 to $210/st fob in April.

River and inland prices will see some decreases soon if NOLA values stay in the $170s or move to the $160s. However, urea fundamentals suggest prices in the $180s and $190s, so we may see a slight uptick in May. Though, a significant price run-up is not likely due to new lower cost urea production coming online this year and generally weaker nitrogen demand.

Agrium announced on April 18 that it had successfully completed commissioning of the new urea plant in Borger, Texas, with its first run of urea production. The producer now plans to continue to ramp up production and expects full operational capacity to be reached by the end of the second quarter of 2017. The new urea facility will have a capacity of 610,000 t/y urea, of which 100,000 t urea equivalent will be diesel exhaust fluid. This will lead to a reduction of merchant ammonia supply from Borger by 350,000 t/y, which is connected to the Magellan ammonia pipeline.

UAN

UAN activity is generally slow and sales are still reportedly behind compare to previous years.

A few prompt barges are being purchased as wholesalers look to cover existing sales but not create a long position. NOLA 32% UAN barges traded at $170 to $172/st fob for prompt delivery at the end of the month, down from $180 to $185/st at the end of March.

On the East Coast, a part import cargo was reported to have sold at $175 to $180/mt cfr for first-half May arrival. In March, tons off an arriving import vessel were sold at $187/mt cfr.

Some Corn Belt buyers noted still needing to purchase about 15% to 20% of side-dress needs. Buyers along the supply chain still feel UAN has room to move lower and are deferring their purchases as long as possible to reduce exposure to further downside price risk. They are keeping orders small so as not to have any surplus inventory at the end of the season.

Truck prices in the Corn Belt moved down to $200 to $215/st from $200 to $225/st last month. Some quotes were heard as low as the upper $190s fob, but this was not confirmed. However, buyers and sellers agree prices could very well be negotiated lower for large volume orders. Rail delivered prices are increasingly competitive as producers are likely running long on inventories due to a later-than-expected start to the season in many markets.

Wholesalers in the Eastern Corn Belt reported increased UAN activity. Nitrogen application ahead of corn planting in Ohio and Indiana has been ramping up. Truck prices at inland warehouses in Ohio were down $10 from last month to $185 to $189/st fob for 28%. Delivered prices into central Ohio were quoted around $188/st equivalent for 28%.

Producer list prices in the Southern Plains were heard at $195 to $200/st at the end of April but likely saw few sales at that level. Buyers suggested an order of any significant volume could probably be done closer to $185/st fob for 32%. At the end of March, fob prices in Eastern Oklahoma were in the $200 to $210 range for 32%.

OCI's Iowa Fertilizer Company announced that ammonia production has now started at its Wever plant. The plant will produce approx. 1.5 million to 2 million t/y nitrogen fertilizer, including ammonia, UAN, and urea. No timetable was officially set for UAN production, but rumors are afloat that OCI expects to have UAN production started in May.

The outlook for UAN prices is soft due to pressure from relatively low urea prices and new production coming online from OCI Wever potentially sooner than later.

PHOSPHATES

International: International prices for DAP and MAP are falling as global demand remains insufficient relative to supply, despite additional tons being taken out of the market through turnarounds. New business has been limited as most major importers outside India and Pakistan keep to the sidelines, in no urgent need of product and sensing further downward price pressure to come.

As May progresses, the U.S. market will move out of season, and this should see Mosaic become increasingly reliant on export markets to fill its order books. Prices have already dropped to $360/mt fob U.S. Gulf, from $370 to $375/mt last month, but with South American demand looking unlikely to resurface strongly in the coming weeks, further price concessions will be required to keep tons moving offshore. MAP delivered values into Brazil are currently running at $365 to $370/mt cfr, down $5 from last month.

Atlantic producers are increasingly turning their attention to India, which offers the main market potential. Saudi Arabian and Chinese producers remain ready suppliers to India with additional DAP cargoes booked in the mid/high $360s cfr. China fob values are in the $350 to $355/mt range, down $10 from last month.

OCP in Morocco is reported to have opted to cut phosphate fertilizer output by 100,000 tons per month in May and June; it is, however, worth noting that new production capacity from JPH-3 equates to around 90,000 t/m granulated ammonium phosphates. Moroccan fob values are $370 to $375/mt, which is down from $385 to $390/mt at the end of March.

Overall, some further price weakness is expected in international phosphate prices in order to draw in buyers from the sidelines and fill out the May export line-ups.

Domestic: Domestic phosphate prices continued softening through April, but DAP prices were able to find some stability late in the month.

Prices for DAP barges at the end of April traded at $311 to $316/st fob NOLA for prompt shipment and $303 for May loading. These prices are down slightly from the $303 to $321/st seen at the end of March when Mosaic stepped in and purchased 20 or so barges and rallied the market up.

MAP barges have lost their premium to DAP. At the end of March MAP barge prices were $325 to $335/sn, but now MAP prices are at $310 to $316/st essentially flat with DAP. MAP barges were priced $30 to $35 more per ton than DAP in early March due to tight barge supply and good demand in the Plains. Now tightness has abated and MAP demand has slowed in many markets as farmers focus more on planting, which has brought prices back down.

DAP truck prices out of the large river terminal truck markets are around $345 to $355/st, down about $5 from last month but have been largely stable since making that move lower earlier in the month. Conversely, MAP prices have continued to decline as warehouses get resupplied, now showing premiums to DAP at river terminals at a more normal $10.

Lower Mississippi markets saw heavy movement to dealers/retailers as farmers ran ahead of corn and soybean planting. Supply quickly tightened and Midsouth distributors had to scramble to find DAP barges available for prompt delivery. This helped support prices, and some markets even saw some slight firming. However, late in the month, rain slowed things down, and wholesalers have since been able to replenish stocks before the next run.

DAP on the Arkansas River also ran tight with a few sellers reporting no prompt availability. This helped firm DAP prices back up to $350 to$355/st fob Catoosa/Inola level where they were at the end of March.

Inland MAP offers in western Iowa and eastern Nebraska dropped to $375 to $385/st after being around $400 in previous weeks. However, buying interest was still minimal even after the price decrease. Preplant demand has for the most part wrapped up in the area.

Mosaic's prices for DAP and MAP in central Florida were each down $5 to $330 fca and $350 fca, respectively.

Domestic DAP and MAP prices look to run stable to softer as we progress into the side-dress season and application volumes seasonally slow.

POTASH

Domestic potash prices moved mostly sideways through April. Truck prices are still generally at $245 to $255/st out of River terminals. The NOLA potash market was slightly softer at $218 to $224/st fob, down from $219 to $225/st at the end of March.

Canadian suppliers have been looking at warehouse inventory and estimating space for summer fill and have hinted at wanting to bring their warehouse prices up $10 to $275/st. This potential increase does not seem likely to stick, as prices have pretty much stalled out over the past few weeks, and there are still plenty of offers lower than the current producer warehouse price of $265/st.

On March 31, Mosaic announced an incident at its Esterhazy K2 potash mine involving a skip. The company reported that the incident occurred in the "later part of the first quarter" and will likely result in a 200,000 to 300,000 t loss of production, which is expected to negatively impact Q2 sales volumes.

Potash is seeing good movement out of the warehouses in most markets. Supplies became tight for a short period in Midsouth markets as well as in the Mississippi Delta. Memphis prices increased to $250 to $255/st as did St. Louis. Wholesalers also noted tightening supplies on the Ohio River and Arkansas. Rain hit many regions late in the month, which has given distributors enough time to replenish inventories before farmers get back in the fields, so prices are not expected to see further increases.

A couple of potash vessels were delayed during April which led barge prices to move up to $220 to $226/st for a brief stint. Upon arrival prices settled back around $220 and now prices are expected to move sub $220/st fob as peak demand passes.

The short-term outlook for potash prices is steady to slightly softer, however, some markets may potentially see prices increase on short-term tightness.

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(BAS/CZ)