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DTN Fertilizer Outlook

Domestic Wholesale Prices of Ammonia, Potash Could Firm as Fall Demand Picks Up

Wheat preplant demand for urea has not yet lived up to expectations. (Graphic by Karl Stenerson)

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

AMMONIA

International:

Early August brought more price stability followed by a recovery in ammonia trade with the Eastern Hemisphere picking up at a faster pace than the west. The market is expected to be firmer in September with maintenance ongoing at several ammonia plants.

In the United States, the Yara/Mosaic contract price for September deliveries of ammonia into Tampa settled at $215 per metric ton (mt) cost and freight (CFR), $25 higher than the August price.

Phosphate granulation is ramping up at the MPC plant in Saudi Arabia, effectively shrinking export availability of ammonia in the Middle East. Ma'aden sold a spot cargo of 23,000 mt to Trammo for end-of-September loading out of Saudi Arabia at $260 mt FOB (free on board -- the buyer pays for transportation of the goods). Long-term contract prices edged up to $210-$220 mt FOB range, up from $185-$210 in August.

In Yuzhny, Ukraine, Ameropa concluded a new deal with Gemlik for a full cargo of Black Sea ammonia to be delivered later in September. The price is netting back around mid-$190s mt FOB, up slightly from $190 at the end of last month.

Stable to firmer downstream fertilizer prices, as well as good industrial demand, together with the market entering a seasonally stronger period over the next couple of months, all provide further support to ammonia prices in the short term.

Domestic:

Domestic ammonia markets were seasonally quiet in August, and prices were mostly unchanged or slightly firmer with prompt pricing now ranging from $300-$310 per ton FOB across the Corn Belt to $200-$245/ton FOB in Oklahoma.

Fourth-quarter prepay prices are posted higher from $315-$330/ton ex-plant in Oklahoma to $315-$350 FOB in the Corn Belt. Buyers have yet to be convinced of higher Q4 prices; however, the increase in the September Tampa contract price does provide some support to domestic producers' bullish price ideas.

Prices in the Southern Plains have firmed up a bit. There was some light demand remaining in the west for wheat preplant, but most price support has stemmed from the clean-up of excess inventories at Enid and Pryor. Although ammonia has offered the most attractive N value to retailers and farmers, demand for wheat preplant has left distributors generally disappointed so far. Prices were up to $200-$245/ton FOB Oklahoma from $180-$210 for summer fill.

Pricing in the Corn Belt was also slightly firmer. Prompt offers were hard to find as sellers prefer to work on a case-by-case basis for any nearby demand. The market consensus of the prompt price level is about $280-$310/ton FOB Corn Belt. PCS is quoting $305/ton FOB Lima.

The outlook for ammonia prices is for gradual firming as fall application demand picks up and new downstream urea production starts up and removes ammonia tons from the market.

UREA

International:

The international urea market was volatile in August, starting firm, then softening, but by month-end, prices increased again.

In North Africa, Egyptian producers managed to increase granular urea FOB levels to $225-$230 mt, up from $210-$215 in July. European buyers are not under pressure to accept these higher levels at the moment, but further strength in the euro against the dollar does make the continent an interesting place for sellers in the coming weeks.

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In India, balance levels show that a tender is expected to be announced any day now for October shipment. Price increases were realized in the key supply region of the Middle East ahead of this Indian demand. Middle Eastern FOB values are currently at $185-$210 mt, up from $165-$200 mt at the end of June.

In Brazil, there is a stand-off between importers and sellers, with the former reluctant to fully accept higher offers as corn prices are low. On the other hand, sellers are not in a position to lower prices, owing to higher replacement costs in the AG.

With India back in September, prices could see a slight firming before weakening at the end of the year due to a significant drop in U.S. imports.

Domestic:

Barge availability is very limited, and with imports not expected until later in the month, buyers are looking toward domestic producers and seeing higher prices. In August, barge prices rallied up to $195-$200/ton FOB from $178-$182/ton last month. Additionally, firming international prices are providing support to New Orleans, Louisiana, (NOLA) values.

The interior market has been mostly quiet. Inland offers are ticking up on the back of higher replacement costs out of NOLA. Retail demand is seasonally slow with the spring season now wrapped up in all regions. It is also still too early to fill storage before fall in many regions because of the humidity. That being said, new warehouse prices are mostly yet to be tested.

The only grower activity has been in the west where wheat preplant demand for urea has not yet lived up to expectations. Urea has lost some nitrogen demand to the more attractively priced ammonia. But more so affecting demand than that is the declining price of wheat, which has fallen down near the $4 mark for the nearby CBOT contract.

The market continues to monitor progress at Koch's new urea line in Enid. Last reports suggested production was expected to begin early-to-mid September. The new urea line will provide the plant with an additional 816,000 tons per year of urea capacity.

Meanwhile, Dakota Gasification expects to bring its urea plant online in the early part of Q1, providing an additional 1,100-short-ton-per-day capacity to the domestic market ahead of the spring season.

As more production comes online domestically and imports pick back up again in September, we expect urea prices to run steady to slightly softer in the short term.

UAN

UAN markets were seasonally slow in August and prices were unchanged to slightly firmer.

Prompt prices across the Corn Belt are generally in the $150-$165/ton range for 32%, flat from the end of August. The low end of the range being available on the Ohio River and the high end reflecting FOB plant values in Iowa. Spring prepay is reportedly being offered at $160-$175/ton FOB across the same region.

Generally, ex-plant pricing in Oklahoma is at $155/ton FOB, but there are reports of prompt sales as low as $145/ton, even with prices in July.

NOLA barge trading is slow with last trades at $125-$132/ton FOB NOLA for prompt barges, up slightly from fill barges sold at $120-$125/ton FOB in July.

There has been no fresh import activity on the East Coast, where neither import offers nor buyer interest have been reported; an earlier EuroChem sale of 33,000 tons UAN at $152 mt CFR for end-of-September/early October loading remains the latest concluded.

The price outlook for UAN prices remains stable. Most markets seem to have seen a strong enough fill response to support current values through the short term.

PHOSPHATES

International:

Significant developments in the international phosphate market in August included the decision to implement anti-dumping duties in Vietnam, effectively barring Chinese DAP from competing in what was its second-largest market. The other major development in August was the first export cargo shipped from the new MWSPC plant in Saudi Arabia comprising a DAP cargo to Bangladesh.

In terms of prices, the market is split once again with prices east of Suez firming up on the back of a squeeze in availability out of China while prices in the west remained weak with imports in both Brazil and the U.S. running well ahead of last year but with little scope for further demand.

North Africa FOB values are at $335-$355 mt, down from $355 mt in June. CFR Brazil prices for MAP increased to $345 mt by the end of August, whereas in July MAP shipments were priced at $335 CFR. Chinese export prices firmed to $345-$350 mt FOB, up from $335 last month.

There appears to be limited further upside to prices as buyers have covered a large proportion of their near-term requirements. While some producers are likely to sit back and wait for buyers to raise their price ideas given the high level of forward commitments, they may well end up disappointed. We look for international phosphate prices to run stable to slightly softer in September.

Domestic:

Domestic phosphate markets are quiet as wholesalers await the impending emergence of demand due after harvest. For now, retailers are comfortable waiting on the sidelines in hopes of lower prices.

Truck prices off the river are at $345-$355/st FOB, generally unchanged or slightly firmer than the end of July. MAP at a $5-$10 premium to DAP, depending on local supply.

Meanwhile, NOLA DAP barges ended the month trading at $316-$320/st FOB for prompt/September loading. MAP is a little firmer at $318-$325/st FOB NOLA. Both are slightly softer from prices at the end of July.

Some light demand is picking up in the Oklahoma and eastern Colorado region as a few fields get harvested. DAP prices at Tulsa are at $345-$350/st FOB. MAP is at a $5 premium as supplies are not as tight as DAP.

The short-term outlook for DAP/MAP prices remains stable to slightly softer. So far, imported tons have mostly gone straight into distribution systems instead of trading at NOLA. With more vessels scheduled to arrive in September, more length is expected to trade at NOLA and forward barge pricing is showing slightly softer values. However, if incoming vessels face any delays, price risk would certainly be greater to the upside.

POTASH

Interior potash prices edged up through August, each week showing slight increases at various warehouses. Truck prices on the river were generally in the $240-$250/ton range. A distributor on the Ohio River who had been offering $235/ton FOB in late-July moved up to $240-$245/ton toward the end of August.

The NOLA potash market is quiet. Last trades were at $218-$222/ton, which remained flat through August.

The outlook for domestic potash prices is flat to firm as end-user demand picks up post-harvest.

However, new production coming online this year at the K+S Bethune mine makes price direction more uncertain late in the year and into 2018. Bethune is expected to produce 600,000-700,000 tons of potash this year, most of which will likely be railed to Vancouver. This will likely displace other tons back into North American rail markets and make for a more competitive landscape.

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