DTN Fertilizer Outlook

By Karl Stenerson
Market Reporter - Fertecon
Informa Agribusiness Intelligence

Here is a breakdown of wholesale prices and trends by the various fertilizers:

AMMONIA

International:

The international ammonia market continues to go from strength to strength amid tight supply in the near term across and strength in downstream markets, such as capro and urea.

Supply out of Yuzhnyy is still restricted and FOB prices climbed to $270 to $290 per metric ton (mt) at the turn of the month, up from $210 to $215 in September.

Supply is also tight from the Middle East and spot sales look unlikely for the balance of the year. Prices were assessed at $270 to 325 mt FOB, up from $230 to $275 last month.

Yara and Mosaic have settled the Tampa price for November at $305 mt CFR, marking a $60 increase over October at $245. This follows a CF export sale of 22,000 mt at $300 mt FOB Donaldsonville to an international trader.

One negative for the market going forward; Mosaic announced that it was taking down its Plant City phosphate facilities in the U.S. This will decrease a significant volume of ammonia import demand for 2018.

The short-term outlook for ammonia prices continues to be firm.

Domestic:

Export demand and domestic supply disruptions allowed for sellers to increase ammonia prices slightly in October ahead of the fall ammonia run.

Wholesale prices in the Corn Belt are in the $325 to $350 per ton (t) FOB warehouse/pipeline range, up from $300 to $340 in September. Growers in Illinois, the largest fall anhydrous consuming state, were just starting to get rolling at the end of the month. Given decent weather, demand this fall is expected to be strong due to the attractive price per unit Nitrogen ammonia currently offers.

Ex-plant prices in Oklahoma are currently around $300/t, up from $275 to $285/t last month. A production outage at LSB Industries' Pryor ammonia and UAN plant due to a fire helped tighten up the market.

Cold temperatures and snow are impeding application efforts in the Northern Plains and the window of application in North Dakota and Minnesota looks to be cut short this year. Some have estimated this season's volumes may end up around 70% to 75% of last year.

The outlook for domestic ammonia prices is mostly firm as replacement costs imply higher prices, but there is downside risk if the application season gets cut short and inventory carryover is significant.

UREA

International:

In October, urea prices firmed further, bolstered by reduced supply from China and shutdowns in production in the Arab Gulf while trader buying continued to support North African levels.

India held another tender further boosting sentiment, but were only able to purchase 426,000 mt as many sellers were not accepting counter prices in a firming market. India tendered again late in the month and made counter offers for 600,000 t, but considering India's current stock levels yet another tender is expected for January shipment. Supported by Indian buying, Middle East cargoes traded up to $230 to $290 mt FOB, from $215 to $275 in September.

European buyers remained cautious for most of the month and reluctant to accept higher Egyptian prices. However, time is ticking with the season not far off and continued sales in Egypt at above $300 FOB shows it is a fight they are unlikely to win.

Even Brazilian prices have edged up; the market is picking up as Safrinha approaches and higher numbers were paid, especially seeing that India continued to prove a threat to their potential supply for November and now December.

A floor seems to be forming in the urea market moving into the fourth quarter 2017, reducing the downside potential, but moving into Q1 it could weaken as the U.S. pulls less imports due to new capacity.

Domestic:

Domestic urea prices remain at a significant discount to international levels. NOLA urea barge prices were rangebound in the month of October. Trades during the last week of the month took place in the $240 to $255/t FOB range, which is up from $230 to $240 at the end of September.

Trading activity in the urea market remains mostly trader-to-trader as the retail/grower segment continues to sit on the side line. At the moment, farmers are focused on wrapping up harvest and getting some P and K applied rather than purchasing urea. Until the end user shows up, retailers will remain hesitant to step in at this price level.

Urea players are also monitoring the fall ammonia season. Retailers are sure to push farmers to apply as much anhydrous as possible this fall due to the attractive $ per unit N value it offers. If growers have a strong fall ammonia run then there will be less N need next spring when urea is predominantly applied.

Koch's new urea line at Enid is up and running, adding an additional 900,000stons per year capacity to the domestic market.

Warehouse prices were steady to slightly firmer from last month. Prices on the River are generally in the $275 to $285/t FOB range, up from $265 to $275 in September.

With India expected to announce another tender in December, there is continued upside potential in the international market. This may prompt traders to push up NOLA values in the short-term. However, after India is done purchasing, international producers will be looking at Brazil and then the U.S. New domestic production is finally starting to ramp up now, which bodes well for lower prices in the first and second quarter as reduced import demand from U.S. drags on international prices.

UAN

Domestic UAN prices firmed in October on support from relatively higher urea prices and tight domestic supply. U.S. Gulf producers are seeing strong export demand in Latin America, helping limit their domestic book, and various Midwest producers are facing unexpected production outages. Importers are also looking at higher replacement costs due to rising international prices and domestic prices continuing to run at a relative discount.

UAN 32% prices on the River system are in the $175 to $190/t FOB range, up from $170 to $180 last month. Spring prepay prices are generally posted about $10 higher.

New sales were seasonally slow. On the buy side, retail interest is limited as farmers are focused on wrapping up harvest and getting some P and K applied rather than purchasing UAN. Wholesalers are doing some price checking with producers but quotes are hard to find. Producers appear well sold for the fourth quarter 2017 and first quarter 2018 and are hesitant to make offers as they see more upside for prices in the short-term.

Barges of UAN at NOLA traded at $155 to $165/t FOB for fourth quarter, up from trades in September at $135.

With producers looking relatively comfortable through first quarter due to recent supply disruptions and solid fill demand, UAN prices are apt to continue increasing in the short-term as long as urea stays firm. Also, if fall ammonia application in the Corn Belt mirrors the season seen thus far in the Northern Plains, growers will need more UAN in the spring to satisfy nitrogen needs, which would support UAN prices.

PHOSPHATES

International:

Phosphate prices have continued to increase in October, driven by continued demand and increases in the cost of raw materials, holding onto a firming trend despite good supply.

This month's news has been dominated by Mosaic's announcement that it will be closing its Plant City phosphate plant by the end of this year. The complex has a production capacity for close to 1 million mt per year P2O5 phosphoric acid and 1.96 million mts DAP/MAP.

Mosaic has indicated that this will be an indefinite closure of at least a year with local press reports suggesting that voluntary retirement redundancy packages are being offered to a large proportion of the employees. This in turn suggests a potentially long-term closure.

Mosaic has sold U.S. DAP at $345 mt FOB to Latin America while prices for MAP in Brazil have climbed to $365 to $370 cfr with Russian MAP reportedly sold at $340 to $345 FOB to South Africa. Traders are reported to have paid higher prices in the range $365 to $370 FOB for Chinese DAP.

With increasing raw material costs and production cutback from the U.S., the short-term outlook is stable-to-firm.

Domestic:

Phosphate prices increased across the board following Mosaic's announcement that it will be closing its Plant City phosphate plant by the end of this year. The news coincided with a seasonal uptick in demand, which also helped the push for higher prices.

NOLA DAP barges have traded up to $345/t FOB for Mosaic product. MAP barges are in relatively tight supply and prices were reported as high as $356/t FOB NOLA at the end the month. These prices are up compared to the end of September when DAP barges were trading at $332 to $340 and MAP slightly above.

Interior phosphate prices were up about $15. Prices on the River are generally in the $370 to $380/t range, up from $355 to $365/t a month ago.

MAP is holding a $5 premium at most locations and $10 at few. MAP supply on the River is generally tighter than DAP. Reports suggest the DAP/MAP split on the import cargoes this fall favoured DAP more than in previous years.

Application in the Corn Belt is being hampered by rains. Movement was steady but somewhat slow in the key states of Illinois, Indiana, and Ohio. In the Midsouth Fall application is starting to wind down. In the Plains region, however, demand is improving as more farmers switch focus from harvest to fertilizer applications.

Additionally, Winter wheat planting has been stronger than expected and with it demand for phosphate fertilizers.

Mosaic's announcement is expected to continue to provide support for phosphate values in the short-term. In the long-term, the closure of the mine is not expected to have as big of an impact on domestic prices. Mosaic will be reducing exports from Florida now that they have cheaper means of supply in Saudi Arabia. This will counteract the loss in domestic production that comes with the closure of the mine. Mosaic could also try to ramp up production somewhat at its other lower cost phosphate facilities to make up the difference. The U.S. will also continue to see plenty of imports as more production comes online in Morocco within the next year.

POTASH

Following PotashCorp's announcement last month that it is temporarily cutting production at its Allan and Lanigan mines for eight to 10 weeks, domestic potash prices have been steady-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. Terminal prices on the River are still in the $245 to $255/t FOB range. Retailers are mostly yet to return to the market to secure additional fall tons. Warehouse activity consists of shipping out previous orders.

The price outlook for potash is looking steadier for fall. The market is balanced at current prices and there are not any fundamental changes in the short-term to suggest any price change will be needed. Volumes this fall are expected to be in line with previous years. Potash prices are slightly higher compared to year ago, but the good crop is expected to lead to slightly better demand and counter act this.

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

(BAS/AG)

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