DTN Fertilizer Outlook

By Karl Stenerson
DTN Fertilizer Columnist

Here is a breakdown of wholesale prices and trends by the various fertilizers, according to Fertecon:

AMMONIA

International ammonia prices continued to firm during September with limited spot opportunities quickly snapped up by buyers and traders at a premium.

Availability of spot product in the Black Sea, Baltic, Europe and Algeria is reportedly tight. OCI paid $270 per metric ton (mt) FOB (free on board -- the buyer pays for transportation of the goods) Baltic for a 10,000-mt lot, a $60/mt premium versus the contract level of $210 mt FOB. Turkey paid slightly higher to secure metric tons out of Yuzhnyy amidst recent production issues by Rossosh and TOAZ. At the end of September, Yuzhnyy FOB levels were assessed at $210 to $215 mton, up from $190 to $195 in August.

The Middle East spot price moved up with Trammo securing October tonnes from PIC at around $275 FOB for loading next month. The Middle East spot price range is currently $230 to $275 mton FOB, up from $210 to $260 last month.

Mosaic's declaration of force majeure on inbound ammonia because of the disruption and damages caused by the Hurricane Irma has not prevented an increase in the Tampa settlement for October. The agreement was made at $245 CFR, $30 up from the September level.

Tight supply at several major supply hubs, especially in Asia and the Middle East, is expected to continue supporting international ammonia prices higher in October and November.

Domestic ammonia prices moved firmer in September even while the market remained quiet, awaiting the fall application season. Sellers expect to achieve further price increases for sales opportunities that may emerge after current dealer inventories are spent. However, noticing how CF continues to export out of Donaldsonville, buyers suspect that even while the international market may be short the domestic market is still long.

In the Corn Belt, markets were quiet as most tanks are full and buyers and sellers are waiting to see how much demand weather conditions this fall will support before making further decisions. Prompt fourth-quarter prices are running about $300 to $340/ston FOB across the Corn Belt, up from $300 to $310/t at the end of August.

Wheat preplant movement is wrapping up in Kansas and Missouri. Ammonia prices in Oklahoma were reported at $275 to $285/t FOB for prompt, up from $190 to $240 last month. Post-harvest demand is not expected to pick up until November once soil temperatures drop to the appropriate level.

Relatively higher urea prices and the increased Tampa settlement are boding well for sellers' prospects of higher ammonia prices; however, the weather and corresponding demand will be the deciding factor of price direction this fall. If application volumes seen this fall are in line with previous years, we expect domestic prices to continuing trending firmer.

UREA

The international urea market rallied in September ahead of an Indian tender early in the month and then again ahead of another India tender late in the month. This run-up was mainly driven by traders both going long as well as some deciding to step in and cover shorts before further increases. This led to higher prices in Brazil and New Orleans, Louisiana (NOLA).

Ahead of the first tender, India had been anticipated to buy about 700,000 mt, but they did not receive many offers, and few besides Iran were willing to move lower on price. As a result, India took only 327,000 mt at $240 to $245 mt CFR, and then had to come back with another tender late in the month in which they took 591,000 mt, but prices were about $40 higher by then.

The Indian tenders took care of a lot of long positions in the Middle East and are thought to have mopped up any length that was there for October. Middles East FOB values have since plateaued and softened a bit, currently indicated at $215 to $275 mt. Nevertheless, these prices are still up significantly from $185 to $220 at the end of August.

In North Africa, Egyptian producers managed to increase granular urea FOB levels to $295 to $310 mt, up from $225 to $240 in August. However, the market is generally of the opinion that current values are too high as sellers fail to find any traction in Europe.

There is concern of oversupply in some key demand markets. Importer in Brazil are worrying about an anticipated flood of urea vessels amidst already high import levels/inventory. Furthermore, the U.S. is unlikely to draw on any more tons as the NOLA price remains under pressure and trades well below the international market. However, it could be the case that India has taken away some of that excess supply, and they could potentially return for another tender in November.

Some downward correction in international urea prices is expected in October, but at the moment, no collapse in price is anticipated as availability remains limited with key producers already having booked significant volumes for fourth quarter.

On the domestic side, NOLA urea barge prices rallied for most of the month as traders watched higher and higher prices being paid in the international markets. From trades at $195 to $200/t FOB early in September, prices moved sharply up and peaked at $260. Subsequently, prices slipped in the last week of the month to $230 to $240 as pressure from the absence of domestic retail demand prevailed and traders lost confidence in the NOLA market and seized their opportunity to take profit on earlier purchases.

Interior demand remained slow and unable to support replacement costs out of NOLA. Terminal prices increased to around $265 to $275/t FOB, from $225 to $235 at the end of August but remained mostly nominal as buyers kept to the sidelines.

Koch is heard to be closing in on new production from their Enid facility, and some output is expected, if not by the end September, certainly in early October.

At this price level, buyers are likely to stick to hand-to-mouth purchases this fall and put off building inventories until closer to spring. Prices are liable to slip again before year end as the U.S. market continues to adapt to new domestic production capacity. However, in the short term, some volatility is expected and some slight strengthening is likely in coming weeks due to the current large spread between NOLA and other international markets to the point where re-exports are nearly workable.

UAN

Inland and river prices ticked up in September as sellers, still comfortable following summer-fill programs, looked to test higher values due to the recent strength in urea. Buyers, facing no immediate demand at the farm level, are mostly discouraged and have kept toward the sidelines.

Prompt prices across the Corn Belt are generally in the $170 to $180/t range for 32%, up $15 to $20 from the end of August. Spring prepay is generally being offered $5 to $10 higher than prompt values. Demand continues seasonally slow.

Ex-tank indications on the East Coast finally saw some uplift with latest prices reported at $180 to $185/t FOB. These prices are up about $30 from fill. Deep-sea import interest will likely be stimulated if sellers are able to achieve this higher level. For now, the East Coast remains quiet in terms of UAN activity, with no new import business concluded or offers heard.

At NOLA, the last confirmed trade was done at $135/t FOB, but offers have since moved up in the $140s/t. An indication for first quarter delivery at $165/t was heard quoted by an importer.

The short-term outlook for UAN prices remains stable to firm. Sellers are looking to capitalize on the recent strength in urea prices; however, with fill tons left to move and significant end-user demand still far in the distance, buyers will likely remain on the sidelines in the nearby.

PHOSPHATES

Internationally, September saw most phosphate producers achieve higher prices against a platform of tight global supply for October and beyond.

With Mosaic's supply being disrupted by Hurricane Irma (see update below in domestic section), U.S. DAP exports prices climbed on sales to Latin America. Last purchases were concluded at $345 mt FOB, up from a price of $315 to $320 at the end of August.

Meanwhile, European importers accepted prices of $360 to $365 mt FOB for North African DAP, which is up about $20 from the August price level. Chinese DAP has been purchased at up to $360 FOB for South and Southeast Asia.

While higher prices have been accepted, there are growing signs of increasing price resistance. In Europe, the falling value of the euro against the dollar has played its part in sending buyers to the sidelines, although this has had more to do with the $30 to $35 increase in FSU producers' asking prices. In the U.S. domestic market, it is getting late to purchase DAP in NOLA to arrive in time for the fall season.

Producers' hopes are riding on strong fill demand emerging in the U.S. domestic market and Europe for the spring season. It remains to be seen whether there is sufficient new demand to allow DAP producers to raise prices further or whether buyers in the U.S. and Europe choose to defer their purchasing decisions in the hope of securing lower prices.

Domestically, Mosaic issued the following update on Sept. 20 regarding the impact of Hurricane Irma:

"While Mosaic was fortunate to have avoided significant damages in connection with Hurricane Irma, the company expects approximately 250,000 t to 350,000 t of lower production in the month of September. Together with the damage to Mosaic's Bartow warehouse, this could result in a loss of up to 400,000 t of finished phosphate product."

Mosaic stepped in as a buyer and bought three DAP barges on Sept. 13 at $324, $326 and $330/t for September loading from NOLA. Shortly after, the company raised asking prices $20 to $345/t FOB NOLA for DAP and $355 for MAP.

Whereas the loss of production is not insignificant, supplies in the Gulf are being bolstered by a solid stream of imports arriving through September and October, including up to nine panamaxes from Morocco. It appears the heavy import line-up took the edge off the rally in the NOLA market and allowed for DAP prices to slip back to $332 to $340/t by the end of the month. That being said, DAP barge prices are still up quite a bit from the August level of $315 to $320/t.

Inland prices tended to follow the NOLA trajectory and firmed up month-on-month but also decreased slightly toward the end of the month. For most of the September, there was scant end-user demand apart from light buying to finish up winter wheat planting and some tons moving into position for the start of the fall season in the Corn Belt.

Buyers are expected to return to the market later in the fall to cover remaining needs. For now, buyers are comfortable with current inventories and feel there is potential for lower prices if they continue to push back purchases.

Truck DAP prices the river vary by location but are generally around $355 to $365/t FOB, up from $345 to $355 at the end of August. MAP is maintaining a $5 to $10 premium to DAP.

With a couple of import cargoes still due in October and the impact on Mosaic's production thought to be somewhat oversold, we look for DAP prices to ease back slightly in October.

POTASH

PotashCorp announced on Sept. 20 that it is temporarily cutting production at its Allan mine for 10 weeks, commencing Nov. 19, and its Lanigan mines for eight weeks commencing Dec. 3.

Previously, the outlook for late fourth quarter and early first quarter was for slightly softer prices to emerge after the fall application season. However, now considering PCS reduced output, prices in the fourth quarter and first quarter 2018 are now expected to be more stable.

The main focus during August was on the progression of the crop as potash markets remained relatively inactive and prices stable. Toward the end of the month, Illinois, Indiana, Ohio and Michigan farmers were all able to hit the fields. Generally, anecdotal yield reports have suggested better-than-expected results, especially in areas of the Midsouth.

Some potash is starting to hit harvested fields in the Midsouth, but application activity in the Corn Belt is yet to ramp up. Wholesalers report continued movement of previous commitments to customers and increased price enquiries; however, new sales are still a little slow.

Prices across the Midwest are stable to firm. There is still generally plenty of product available below the producer targeted $275 to $280/t FOB inland warehouse, but offers in the $240s are now becoming hard to find. Most river terminal prices are around $250/t, up from the $240s in August.

NOLA potash barges are firming up a bit. Interest is a bit limited, but new trade brought the NOLA barge price range up to $220 to $228/t FOB, up from $218 to $225 at the end of last month.

Questions for Karl Stenerson may be sent to Talk@dtn.com

(AG)

Copyright 2017 DTN/The Progressive Farmer. All rights reserved.