DTN Fertilizer Outlook
Short-Term Outlook for Most Domestic Wholesale Fertilizer Prices is Steady to Firm
Here is a breakdown of wholesale prices and trends of the various fertilizers:
AMMONIA
International:
Tight ammonia spot supply, driven by firm gas prices in Europe and various production outages, continued to push global ammonia prices higher in July.
Prices ex-Yuzhnyy, Ukraine, are at $280 to $285 per metric ton (mt) FOB (free on board -- the buyer pays for transportation of the goods) on the back of spot sales to Europe, up from $244 to $248 at the end of June. Turnarounds/maintenance programs are continuing in Russia, and there looks to be no spot availability for August from either the Baltic or the Black Sea.
On the positive side for supply, OCI Fertilizer Group has restarted the second ammonia line at Geleen in the Netherlands as ammonia prices have no doubt started to exceed production costs, even with high gas prices.
There are still supply issues in the Far East region, but Panca Amara Utama (PAU)'s new plant in Indonesia was up and running by the end of the month, albeit in the commissioning stage. Yara, however, is expected to see Pilbara running shortly in Australia with exports following on quickly. This will help to ease the supply-demand balance in the region.
The Tampa, Florida, settlement late in the month confirmed the upward trend with Yara securing a $30 increase for August deliveries to Mosaic at a price of $310 per mt CFR (cost and freight).
The global ammonia supply-and-demand balance continues to be fragile. However, for now, the price outlook in the short-term continues to be firm.
Domestic:
Domestic producers have increased their asking prices for prompt and fall prepay tons on the back of a firming international ammonia market. New trade at the higher level has been minimal so far, but firm natural gas prices overseas are making a few buyers who were reluctant to commit to fall tons now thinking twice.
Corn Belt FOB values generally seem to be around $345 to $355 per short ton (t) FOB for prompt and $370 for fall prepay, compared to the initial summer fill offers in June at $300/t for prompt and $350 to $360 for prepay.
Ex-plant prices in the Southern Plains moved up to $300 to $320/t FOB for August shipment compared to $300 at the end June. Prepay offers are generally $15 higher at $315 to $335/t FOB. Following recent rains, tons have started to move to the Oklahoma/Texas panhandle region for immediate application on pasture ground and top-dress milo. Additionally, suppliers are getting tons in place ahead of wheat planting, expected to take place in September and October. Wheat prices have rallied, with the front-month contract trade around $5.70 recently, up more than a $1 from late June.
The short-term outlook for ammonia prices is stable to firm, with replacement costs on the rise.
UREA
International:
Global urea prices moved down and up in July, ending the month about even with values at the end of June. India finally returned to the market with a tender in late July, making prices firm up in the past week. The lack of Chinese exports, high natural gas prices in Europe, and the U.S. sanctions on Iran potentially limiting the country's exports continue to be cause for a tighter-than-expected supply scenario.
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Brazil proved to be a vital outlet for Middle Eastern producers in the absence of India, supporting Arab Gulf FOB values at $267 to $270/mt FOB at the end of July, down slightly from $275 to $280 in late June.
North African FOB levels were largely stable ending July at $271 to $284/mt FOB, compared to $268 to $284 last month.
At the time of publication, India had awarded 712,000 t in its latest tender, of which 662,000 t was from Iran. In that case, it would appear there is some length left in the Arabian Gulf and North Africa to place for August, which may pressure prices lower in the coming weeks. However, the market could potentially continue to trade firmer if Iran is unable to continue exporting urea because of the U.S. sanctions.
Domestic:
Urea prices in the U.S. held steady in July due to tight end-of-season inventories and a firm international market. Domestic producers are understood to be well sold for the third quarter, following a strong uptake in summer fill programs and strong export orders.
New Orleans, Louisiana (NOLA) barge prices ended the month at $248 to $255, slightly higher than the $245 to $250 in late June. Imports have slowed, following the end of the spring application season, and with U.S. prices at a discount to the rest of the world, sellers have been able to achieve higher prices.
River terminal prices are up about $5 from last month to around $275 to $285/t FOB.
The price outlook is mostly stable following summer fill sales. Downside is limited in the short-term while the international market is firm. The upside is limited by seasonally slow demand and weak crop prices.
UAN
Domestic UAN prices moved sharply lower in mid-July following domestic nitrogen giant CF's summer fill announcement. Offers for UAN32% were issued at $175/t FOB Iowa, $160 to $165 FOB Oklahoma and $165 to $168 FOB St. Louis/Cincinnati. These prices were generally $20 to $25 higher compared to last year's summer fill.
CF has since retracted all their offers, and buyers are anxiously waiting for new indications, with many still wanting to secure further volumes and being displeased they were not able to do so already. Prices are anticipated to be higher, but speculation varies with some expecting only a $10 increase from last fill business while others say $25.
That being said, CF is willing to sell a few trucks out of their plants to service prompt demand. Values were reported at $200 to $205/t FOB Iowa and $190 Oklahoma, which are about $25 higher than the last fill sales. A few distributors on the river system are offering limited tons for nearby shipment in the $177 to $188/t FOB range for 32%, targeting values higher than last fill sales by CF, but probably lower than where new offers will be made by the producer. Many buyers are hesitant to commit even at this level, as they would rather wait for more clarity from domestic producers.
NOLA UAN barges traded as low as $147 to $153 during peak fill sales but have since edged up a bit. Prices currently sit at $152 to $155/t FOB, compared to $165 to $170 at the end of June.
The price outlook for UAN prices is firm basis a strong nitrogen market and plenty of unmet UAN demand.
PHOSPHATES
International:
Prices for phosphate fertilizer firmed further through July. Producers continue to easily fill their order books with steady demand in key countries despite a more bearish outlook for the Indian monsoon, a further depreciation of the Pakistani rupee, and weak soybean prices in the U.S.
Despite the full impact of the trucker strike on inland truck freight rates still up in the air, demand in Brazil still shows strong fundamentals for farmers, and importers have paid up to $450 to $452/mt CFR for their MAP as of late, compared to $435 to $440/mt CFR at the end of June.
Demand fundamentals seem less supportive in India where importers appear to have paused for breath against a backdrop of deficient monsoon rains, port congestion and renewed rupee depreciation against the dollar. The latest DAP sales were concluded at $430 to $432/mt CFR, flat from last month.
The short-term outlook remains broadly firm with producers under little immediate pressure to drop prices to chase business, despite risks on the demand side.
Domestic:
North American phosphate supply continues to be tight following Mosaic's closure of its Plant City, Florida, plant earlier this year. Next year will also bring the closure of Nutrien's Redwater MAP production in Canada. Less North American capacity has increased the continent's reliance on imports, which means barge prices need to maintain competitiveness internationally in order to attract the supply needed for fall applications.
On the other side of the equation, weak corn and soybean prices have many questioning the strength of demand we will see this fall. Prepay buying has been minimal from both dealers and farmers for the next season, which has led many to believe we will see cutbacks in application rates. For now, supply and demand seem relatively balanced following strong uptake in summer fill programs. However, with both supply and demand and uncertainty moving forward, many see the fall wheat run in the west as the first true test to the market.
DAP barges traded as high as $404 to $407/t FOB NOLA at the end of July, while MAP traded at $413 to $415. This compares to $399 to $402/t FOB for DAP and $402 to $410 for MAP at the end of June.
DAP and MAP river terminal prices are stable to slightly firmer. DAP is generally at $430 to $440/t FOB with MAP at a $5 to $10 premium. Dealer interest is beginning to emerge ahead of fall applications. Higher yield expectations for new crop are indicating there will be a strong need to replenish nutrients this fall and spring, but weak corn and soybean prices mean there is some concern phosphate applications will see cutbacks.
The outlook for domestic DAP and MAP prices is stable to firm in the short-term basis tight domestic supply and a firm international market.
POTASH
Little has changed in the potash market since last month. Prices have edged up a bit on balanced-to-tight supply. Barges have traded hands at $255 to $265/t FOB NOLA in recent weeks, up from $255 to $260 late June.
River terminal prices are generally up $5 from last month to the $275 to $290/t FOB range. Dealer interest is beginning to emerge as some look to make further commitments ahead of fall applications. Higher yield expectations for new crop are indicating there will be a strong need to replenish nutrients this fall and spring.
The price outlook is stable to slightly firmer with supply and demand mostly balanced in the short term.
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Editor's Note: This information was supplied courtesy of Fertecon, Informa Agribusiness Intelligence.
(BAS/AG)
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