DTN Fertilizer Outlook

Ample Supply, Delayed Sidedress Demand Pressuring Wholesale Fertilizer Prices

(Chart by Karl Stenerson)

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

AMMONIA

International:

International ammonia prices have fallen sharply at many supply hubs and delivered price indications on the back of multiple new sales announcements.

Improved availability from the Black Sea, additional spot volume available from Venezuela, an improved gas supply situation in Trinidad and recommencement of exports of U.S. ammonia by CF Industries as the preplant application season came to an end are all thought to have contributed to the sharp decline in prices.

In the United States, Mosaic bought a spot cargo of 23,000 metric tons (mton) of ammonia for June delivery at $260 per mton cfr (cost and freight), $70 below the price settlement of $330 mton cfr for May ammonia deliveries to Tampa from Yara in the Caribbean. For Tampa, the price of deliveries in June was settled late in the month at $265 mton cfr.

Middle East producers maintain tight spot availability and are focused predominantly on contract obligations for the time being. Prices in the Middle East are assessed to be in the $270 to $340 mton fob (free on board -- the buyer pays for transportation of the goods) range, down from $345 to $370 mton at the end of April.

OCP, a large phosphate producer in Morocco, is securing metric tons around $265 mton cfr from several sources, including the Black Sea. This puts Yuzhnyy fob values $255 to $270 mton, which is down from $300 to $320 mton in April.

The overall short-term outlook for ammonia prices remains soft. Weaker prices of downstream products, which use ammonia as feedstock, as well as generally ample ammonia supply, continue to exert downward pressure on ammonia values.

Domestic:

Domestic ammonia prices were softer across all regions with the furthest drops being seen west of the Mississippi River. Buyers continue to have success bidding down markets as a few producers look to be long for the sidedress season and do not want to miss out on sales. Sidedress application is starting to pick up in areas of the Corn Belt as well as the central Plains, but activity continues to be hindered by cold and rainy weather and somewhat slow corn growth.

Prices in the Northern Plains saw a downward correction after holding relatively stable the past month. Sidedress application is yet to commence in Minnesota. Volumes into North Dakota are limited as farmers are pretty much wrapped up with preplant application and are waiting for the opportunity to sidedress. Twin Cities fob prices fell to $340 to $345 per short ton (ston) from $385/ston at the end of April.

Delivered prices to retailers in the Plains from production sites in Oklahoma were heard to be netting back as low as $250/ston. Fob prices at the plant, however, are at $290 to $320/ston in eastern Oklahoma, down from $330 to $350/ston at the end of April.

Illinois resellers reported minimal sales and movement out of the terminals but hoped for activity to begin ramping up in early June. Wholesalers were optimistic that once fields dry out, they will see a strong sidedress run. Fob prices from river terminals and pipelines at points east of the Mississippi were generally reported around $370/ston at the end of May, down about $40 from April.

The short-term outlook for domestic ammonia prices is soft. Supply for the sidedress season looks ample, as many areas are coming off a relatively disappointing preplant season.

UREA

International:

International granular urea market prices were broadly steady to slightly firmer through May with the exception being the U.S. barge market.

North Africa fob values increased to $210 to $215 mton, up from $190 to $200 mton at the end of April, following sales to traders covering shorts in Europe and Turkey. European buyers have now adopted a wait-and-see approach in reaction to higher Egyptian fobs.

India held an import tender in late May. In total, 515,000 mton of urea was purchased, slightly less than some had hoped, with the majority anticipated to come from Iran and the remaining amount to come from the Arab Gulf. The Middle East fob range widened to $145 to $210 mton from $160 to $200 mton in April as netbacks on sales to the U.S. declined while returns elsewhere improved.

On the back of the Indian tender, the Arab Gulf looks supportive for the coming months; however, export supply from the U.S. is likely to bring further competition in South America while new production in Bolivia is also widely expected to be available as soon as Q3.

In the Far East, Chinese prices increased to $215 to $220 mton fob during May, up from $190 to $200 mton at the end of last month. However, the domestic Chinese season will soon be coming to an end, and these values look difficult to maintain later in the year.

The outlook for international urea prices is soft, with short-term support in the East.

Domestic:

Domestic urea prices moved lower through May, showing no signs of strengthening on seasonally increased demand. The NOLA (New Orleans, Louisiana) barge market has suffered from lack of liquidity and oversupply. Barges ended the month trading at $160 to $165/ston fob NOLA, down from $174 to $178/ston at the end of April. Truck prices out of the major river terminals are around $200/ston fob, down from $210 to $220/ston one month back.

Application activity post corn emergence is getting off to a sluggish start as corn growth suffers from cold and wet weather in northern areas and replanting is still taking place in the central and Eastern Corn Belt. Additionally, wet fields in Arkansas have kept many rice farmers unable to complete their first urea application. In most areas of the Corn Belt, the next round of heavy application work looks about a week or two away.

Prices in the Twin Cities moved as high as $220 to $230/ston in May after seeing strong movement out of the terminals for preplant work, and incoming barges were delayed due to issues on the river. Prices have since settled down to $200 to $205/ston as farmers wait for the corn to grow before commencing sidedress applications in about 10 to 12 days' time.

Tulsa prices also firmed in May due to tight supply as resupply barges were delayed due to flooding on the rivers. Prices have since eased back to the $205 to $220/ston range, even with prices in April.

Generally, volumes moved for preplant were not as strong as distributors had hoped, and as a result, most markets have not seen any uplift in prices. Some remain hopeful new sales will pick up for sidedress and top-dress applications and prices will follow. However, most feel upside price potential is limited as supply looks to be sufficient. We look for prices to remain around the current level through June.

UAN

UAN prices declined through May, facing pressure from depressed urea prices and the slow emergence of demand.

NOLA barges of 32% were trading around $155/ston fob for prompt shipment at the end of May, down from around $170/ston in April. Demand has been limited at NOLA. Volumes remain small and exclusively for nearby shipment as distributors look to cover sales but not create a long position.

Demand out of the river terminals has been steady but slower than distributors would like. Truck prices off the Ohio River are the cheapest with Cincinnati and Mt. Vernon at $175/ston for 32%, much lower than what replacement costs out of the NOLA barge market would imply. On the Mississippi, prices range from $190/ston fob in Memphis up to $205/ston in the Twin Cities, each are down about $15 from April.

The outlook for UAN prices remains soft with continued pressure stemming from depressed urea values and new production coming online from the OCI Wever plant in Iowa, possibly in time for the summer fill season.

PHOSPHATES

International:

The phosphate market is characterised by DAP oversupply in the east and a desire by Atlantic producers to lift MAP/DAP prices in the west.

The latter follows a period of deferred Latin American purchasing and anticipation that buyers have reached the point where they need to return to cover increased seasonal requirements, particularly in the case of Brazil. Producers had some success in raising prices in this market late in the month, with 11-52-0 MAP values increasing to $365 to $370 mton cfr, back even with where prices were in April.

Prices in the U.S. have also increased late in the month on a resurgence of barge liquidity, to $310 to $318/ston fob NOLA for DAP, slightly higher than end-of-April prices. This is equivalent at the high end to the mid-$340s cfr, the lowest-priced DAP market in the world. This augurs well for further increases should demand continue, provided the major exporters to this market target MAP/DAP at other destinations offering higher returns. However, should Latin American MAP/DAP demand fail to live up to producers' expectations due to Chinese competition, the U.S. may serve as a useful outlet to support prices farther South.

Looking east, Indian DAP demand is lackluster, although Pakistan has been actively importing. Against this backdrop of insufficient Indian demand, however, lower prices have been secured out of China with fob values moving down all the way down to $327 to $347 mton from $350 to $355 mton in April.

Overall, some further price weakness is expected in international phosphate prices.

Domestic:

Seasonally, early buying pushed DAP/MAP prices up in the NOLA market, which at the moment seems devoid of imported tons. Trades at the end of May were reported at $310 to $318/ston fob NOLA, up from $303 to $316/ston in April.

Interior DAP prices are mostly unchanged. River terminal prices are still around $340 to $345/ston fob. MAP prices are generally steady to slightly softer month-over-month with the exception being the Tulsa market where MAP is trying to regain its premium to DAP.

Demand is seasonally slow as corn planting nears completion and 67% of soybean planting complete as of May 28. Some light demand may resurface in the Eastern Corn Belt as farmers reapply ahead of corn replant.

Forward expectations of DAP prices vary depending on which direction in the distribution chain one looks to for answers. DAP/MAP prices over $100 more than UAN/urea can be a tough sell at the wholesale/retail level, and the outlook for crop prices certainly does not suggest improved market conditions. However, when looking at international markets, it is easy to see that the NOLA DAP market has a very low value when compared to other markets. This has kept the summer import lineup noticeably light as overseas producers look toward other markets that offer better returns. Some buyers may have noticed this and seeing the potential for higher prices, accordingly chose to take an early position on needs for later in the year. Where prices go in the short term will likely depend on whether other buyers follow suit and begin purchasing now without the influence of imports holding back prices, or push back buying until further in the year.

POTASH

NOLA potash barge trade has slowed in the past few weeks. Similar to what is being seen in nitrogen markets, nobody wants to be long at the end of the season as summer fill prices are expected to come in at lower prices. Barge prices have softened as a result. Prompt barge prices were indicated around $210/ston fob for prompt, but no trades were reported. Full June shipment barge prices are around $205/ston. These prices are down from $218 to $224/ston fob seen at the end of April when prompt barges were still seeing in season demand.

Meanwhile, interior potash prices are steady on the river and at inland warehouses. Truck prices out of river terminals are still in the $245 to $250/ston range. Inland prices are up nearer the $265/ston fob mark but $255/ston can usually still be found with a little shopping.

Potash prices look to run steady in the short term but lower in the medium term as producers look to incentivize buying and movement of product to storage ahead of fall application. Summer fill prices by Canadian producers are not expected to be released until July.

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(AG/BAS)