CUTLINE: This chart shows the monthly price per unit of nitrogen FOB (free on board -- the buyer pays for transportation of the goods) at New Orleans, Louisiana. (Chart courtesy of Fertecon, Informa Agribusiness Intelligence)
By Karl Stenerson
Market Reporter - Fertecon
Informa Agribusiness Intelligence
Here is a breakdown of wholesale prices and trends of the various fertilizers:
International: Ammonia prices came under pressure in late January. Production outages in Algeria, Egypt, Russia and Ukraine were resolved. Unsold metric tons are struggling to find homes, and buyers remain on the sidelines in the hope of seeing even lower offers.
The tipping point occurred when the February Tampa contract price settled at $340 per metric ton (mt) CFR (cost and freight), a $15 decrease over January. Now, evidence has emerged of prices secured in Trinidad falling way short of what has been paid in Tampa, and this in turn is having a knock-on effect on European levels.
The fall in prices comes despite some new and ongoing supply issues. The Caribbean Nitrogen Company announced that it had been forced to close one of its plants in Trinidad as an agreement could not be reached on gas supply. Also, QAFCO, a producer in Qatar, has a unit down for turnaround, but that should restart mid-February.
Middle East FOB (free on board -- the buyer pays for transportation of the goods) prices ended January at $315 to $340 mt FOB, flat from values at the end of December after moving up during the first half of the month. Yuzhnyy, Ukraine, is also indicated lower from last month, but sales have yet to be reported to confirm exactly what is achievable.
The international ammonia market is long, and prices are expected to soften as suppliers struggle to find sales at current prices.
Domestic: Domestic ammonia markets were seasonally quiet in January. Prompt/fill prices in the Corn Belt have come in line with spring prepay values. Prices range from $415 to $420 per ton (t) FOB in Nebraska and Iowa to $425 to $430 in Ohio and Indiana. New business in the region is limited as storage tanks are full and the market awaits spring.
Application activity in the Southern Plains is beginning in limited volumes. Western Kansas and the Panhandle are the most active so far, but activity is expected to ramp up through February. Much of the Wheat Belt is suffering from dry field conditions, which is hampering demand. Nonetheless, prices are holding firm at $370 to $390/t ex-plant in Oklahoma.
The short-term domestic outlook is stable. Besides potential logistical issues in the Corn Belt, there is little upside to interior ammonia prices. The trend internationally appears to have reversed with the market now bearish. Replacement costs from the Gulf are about even with current values. Prices should hold steady until spring, and then price movement will depend on the weather and corresponding demand.
International: The urea market bottomed out in late January as traders stepped in and purchased significant volumes from producers in North Africa and the Arab Gulf. Prices then firmed in early February with support stemming from continued reduced availability in the Far East.
With Chinese exports limited, sellers of Arab Gulf urea have been able to sell to Far East destinations with ease. Middle East FOB prices ended January in the $235 to $260 mt FOB range, up from $225 to $250 in late December.
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India did not come back with another tender in January, but the possibility of one kept sentiment firmer than it might have been.
With key exporters seemingly in a comfortable position for February, urea prices are expected to run stable to firm through the short term.
Domestic: The domestic urea market was seasonally quiet for most of January, and prices were steady. However, buying activity began to pick up later in the month as international prices firmed and reports of domestic production underperforming surfaced.
New Orleans, Louisiana (NOLA) barge prices ended the month trading in the $245 to $255/t FOB range, about even with values at the end of December. However, prices have moved up about $20 from the lows seen in mid-January.
Interior prices were steady with limited new business. There is significant buying left to do before spring; however, buyers seem comfortable to begin the season with current inventories. On the river system, most prompt truck prices are now around $280 to $285/t FOB with spring prepay about $5 higher. Ex-plant prices in the Corn Belt were steady with $280 to $285/t offered at Port Neal, Iowa, and $265 to $270 at Wever, Iowa.
Koch's new urea line at Enid, Oklahoma, went down in late January. The producer is reportedly unsure when production will resume, but some rumors have suggested at least two weeks. This follows reports in recent weeks that the new line was running at reduced rates.
The status of Agrium's new urea line at Borger, Texas, is uncertain. The latest reports suggest the plant has restarted but is still not running at capacity.
Dakota Gasification reports that its new urea plant, which was slated to come online in the first quarter, is currently producing volumes at capacity, but the product being produced is currently off-spec.
In light of domestic production problems and the international market moving up, domestic prices are expected to run stable to slightly firmer in the short term.
Domestic UAN prices continued to trend sideways through January amid seasonally slow demand. That being said, UAN markets are relatively active compared to other nitrogen markets such as urea and ammonia. Some retailers can be seen topping off tanks and furthering spring positions. UAN is the only major fertilizer product priced at a similar level or below that of one year ago, and this makes it a relatively attractive purchase in buyers' minds.
However, with urea prices firming, UAN sentiment has become more bullish over the past two weeks. All eyes are on CF, waiting to see what the producer plans to do with its prices leading up to spring. Many expect a price increase in the coming weeks.
CF did, however, lift its prompt Cincinnati, Ohio, and Mt. Vernon, Indiana, price by $5 at the end of January to $190/t FOB for 32%. The company has not announced spring prepay offers.
Prompt/fill tons in the Corn Belt continue to trade in the $185 to $195/t FOB range for 32%. Prepay values are in the $200 to $210 range. The low end of the price ranges is available ex-plant, while the higher end reflects river terminal values.
Limited liquidity continues at NOLA. Offers are reported as high as $180/t. However, to date, $170/t is the best realized price.
On the East Coast, overseas producers sold UAN at $193 to $198 mt CFR, flat from sales last month at $196.
The outlook for UAN prices is firm. With urea moving up, it is likely UAN producers will push for higher prices, especially considering the current light import lineup.
International: DAP and MAP prices are firm worldwide, with producers taking advantage of healthy order books that stretch into February. Mosaic has been able to conclude export business to Latin America at a higher price of $395 mt FOB, up $10 from the end of December. The producer is comfortable with its supply, mainly due to healthy sales in the U.S. domestic market and reduced output now with Plant City, Florida, idled for the year.
The two key markets of India and Brazil remain seasonally quiet, but both are looking toward the start of the main season in April. In the case of Brazil, there is some concern over the fact that where grain prices are generally fairly flat on last year, phosphate fertilizer prices are higher, eroding the margins for buyers. Nevertheless, higher prices of $415 to $420 CFR have been achieved in January on sales of Russian MAP, up from around $400 CFR in December.
The Indian government presented its 2018-19 budget in early February. In it, the government announced a 24% increase in the subsidy allocation on decontrolled fertilizers (P and K) compared with the allocation for 2017-18. This increase can be seen as bullish for the Indian phosphate market, both for domestic producers and importers, and therefore bodes well for the start of the kharif season in the second quarter.
With limited availability from most producers for February, the short-term outlook for phosphate prices is stable to firm.
Domestic: Some weakness was apparent in phosphate barge prices in January. MAP prices were off $5 from last month to $380 to $385/t FOB, as were DAP to $355 to $365. However, DAP prices began to edge back up at the end of the month as application work started in the Southern Plains and supply remains relatively limited in the Gulf.
Import tons have so far been disappearing into interior distribution and not trading spot at NOLA as much as many were expecting. This has kept pressure off NOLA prices and has led many buyers to look toward Mosaic to cover any nearby demand. The producer is very comfortable with its supply following the closure of the Plant City in January and continues to push for increased prices.
River terminal prices also firmed slightly with the high end of some trade ranges moving up $5 from December. Truck DAP prices are mostly around $390/t FOB river warehouses while MAP continues to command a $25 premium.
Application work picked up at the end of January in areas of western Kansas and western Oklahoma. The region is dry, however, which is hampering demand. DAP and MAP supply is still tight on the Arkansas River despite some new barges arriving recently. The price range at Tulsa is unchanged from last month with DAP still at a firm $385 to $390/t FOB and $410 to $420 for MAP.
The outlook for domestic phosphate prices is stable to firm in the short term. The import lineup is notably lighter in February than in January, and reports of tight supply continue in many inland markets. International markets continue to run stable to firm, making the U.S. a less attractive export.
Application work in the Southern Plains has picked up a little bit in the past week or so. However, as noted above in previous sections, much of the Wheat Belt is facing dry field conditions, which is limiting fertilizer demand.
On the river, most terminal values are around $265 to $270/t FOB with tons still priced at $260 becoming scarce. Some suppliers have raised their offers to $285 to $295 FOB based on NOLA replacement costs, but this level is not achievable today.
Canadian producers increased their inland warehouse offers by $20 to $290/t FOB. There has not been much, if any, trading at this level yet, as buyers are comfortable to begin the spring season with current supply. However, if a retailer were in need today, this is the price that would have to be paid. Producers seem comfortable enough to wait until buyers come to them once the spring season is underway and additional requirements surface.
At NOLA, barges were heard trading in the $230 to $240/t FOB range, up on the high end from recent weeks. Mosaic reportedly increased its barge offer to $255/t FOB NOLA before discounts.
The outlook for potash prices remains stable to firm.
Editor's Note: This information was supplied courtesy of Fertecon, Informa Agribusiness Intelligence.
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