DTN Fertilizer Outlook

Fertilizer Prices Rise, Fall Application Season Shortens

Urea and potash prices at New Orleans are rising ahead of fall application season. (Chart courtesy of Fertecon, Informa Agribusiness Intelligence)

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

AMMONIA

International

Most global ammonia prices continued to rise in September. Many bullish factors remain, including firm nitrogen prices and high gas costs in Europe.

Yuzhnyy prices continue to firm with last business concluded at $345 to $355 per metric ton FOB, compared to $320 to $322 in late August. Russian supply should improve in October following the completion of turnarounds. However, all plants in Ukraine remain closed due to high gas costs and slow downstream demand. We may see Odessa Port Plant (OPZ) return to production soon if all goes according to plan with the new gas-tolling partner.

Supply from Trinidad is improving and, as more supply heads east, we may see some pressure on price. Supply from Southeast Asia should also improve as Panca Amara Utama (PAU) continues to operate. There are reports of more spot product becoming available from the Middle East and suggestions that prices will fall. But the only news lately has been related to contract shipments. Middle East FOB values were last at $353 to $358 mt, mostly flat from $332 to $369 in late August, while the Tampa contract for October was up $20 from September to $330 mt CFR.

The short-term price outlook continues firm, but with supply expected to improve in Q4 for most regions, prices could start moving back down by the end of the year.

Domestic

Interior ammonia prices are stable to firm as the fall application season nears. Discounts for prompt tons are no longer available with suppliers successfully moving prices up to Q4 values. There is concern in Iowa and surrounding areas that rain and cold will shorten the application window.

Corn Belt FOB values for Q4 shipment range from $445/per short ton (t) in Iowa to $465 in Indiana, compared to $385 and $440 in late August. New sales are slow as dealers still need to move through fill and prepay tons before returning to the market. Market participants sense little further upside for prices, especially considering application windows in Iowa may be shortened due to weather conditions.

Ex-plant prices in Oklahoma are up to $375 to $390/t from $300 to $350 last month. Southern Plains soil temperatures are too high yet for post-harvest applications. Corn yields in areas of Kansas and Missouri are a concern.

The short-term outlook for domestic ammonia prices is still firm. There may be some downside if application windows tighten and fall demand underperforms. Either way, lower prices expected for the winter fill period.

UREA

International

The urea market continued strong in September. There are two main drivers to this bullish market. India is buying again and has stated they will not accept product from Iran, a major urea exporter. This will tighten up the rest of the market as India looks to rebuild stocks for the Rabi season. The other reason is rising production costs in Europe and Asia, where gas prices are at the highest levels since 2014 and 2015. These two unforeseen factors, combined with limited Chinese exports, have been enough to push urea prices to three-year highs despite generally weak crop prices.

Middle East FOB prices are $329 to $340 mt, compared to $296 to $301 mt at the end of August. Further price increases seem imminent with strong demand expected from both India and Brazil in Q4.

China has been more actively exporting but most of this appears to be re-exports from Iran. That said, there are no real signs of a significant change in Chinese export availability in the short-term from Chinese production. Chinese granular FOB values at $315 to $320 mt, up from $293 to $300 in late August.

The short-term outlook is still firm with demand from India, Brazil, and Europe expected to support prices.

Domestic

NOLA barge prices continued rising following India's tender announcement in late September with trades at $310 to $325/t FOB, compared to $289 to $295 in late August. Attendees at the TFI World conference in San Francisco were mostly bullish urea, citing Indian demand, U.S. sanctions on Iran, and regionally high gas costs. Domestically, the market is balanced to tight and, with fall applications starting, barge prices are expected to remain stable to firm through the short term. Expectations of increased corn acres next year also support the domestic nitrogen complex.

Interior urea prices were up significantly in September on the back of higher replacement costs. River terminal prices are around $350 to $355/t FOB, up $30 to $35 from last month. New sales across the Midwest are slow. Lagging retail prices are slowing demand. That being said, post-harvest application work is expected to ramp up in the coming weeks and sellers are hopeful buyers will return for hand-to-mouth purchases.

OCI Iowa Fertilizer is reportedly no longer taking a turnaround at the Wever plant in Q4. Details on the turnaround were never fully announced, but many in the market were expecting production to be down for the month of October.

While domestic urea supply is currently tight, there are a few things developing that should help ease this situation. The fact that urea prices are at three-year highs probably had something to do with OCI's decision to push back its turnaround. It would also be fair to suggest that producers with the ability to swing their nitrogen production are currently focusing on producing urea given it provides the greatest margin. It was also heard at the TFI conference that CF is not taking further export sales through the end of the year. Furthermore, a few spot cargoes have been arranged for the states. Whether or not all this will soften barge prices likely depends on developments in the international market.

The short-term outlook is stable to firm with the international market likely poised for further increases.

UAN

CF made its grand re-entrance to the UAN market via tweets. Company representatives took to social media on September 26 to announce they were holding a sales tender on the river. The producer took bids for late Q4 shipment on an FOB basis for truck tons out of their river terminal, as well as for barges on the river.

Many bids were low and not accepted by the producer, but there is uncertainty as to exactly what price level was accepted, how much volume, and who the buyers were. It is rumoured CF claims to have sold 125,00 to 150,000 t at prices around $210/t FOB NOLA equivalent. Market participants are sceptical of this, thinking only large retailers/distributors would pay this price and most of these companies have already admitted their bids were not accepted. So the question becomes: Did CF sell enough or do they need to hold another tender? For now, the market seems split with some thinking CF found enough business at the price it wanted, while others believe the sales tender was a failure and CF will have to return to the market shortly.

Nonetheless, UAN prices posted significant gains through September. NOLA barge prices are $205 to $215/t FOB, compared to $170 to $175 at the end of August.

River terminal prices are generally around the $230 to $240/t FOB range for 32%, up from $192 to $210 last month. New business is scarce with dealers asking for pricing but wholesalers are mostly unable to help until there is more clarity on replacement costs. Suppliers are warning that next prices will be much higher as the market continues to firm.

The price outlook for UAN prices is firm based on a strong nitrogen market and plenty of unmet UAN demand.

PHOSPHATES

International

Global phosphate prices continued stable to firm west of Suez and softer east. Chinese and Saudi Arabian producers accepted lower netbacks to keep product moving into India amid a weak rupee, while U.S. barge prices continued to firm ahead of the fall application season.

Buyers in India were noticeably quiet in the early weeks of September, but liquidity dramatically increased in the last week of the month, with Moroccan, Chinese, and Saudi Arabian suppliers all adding strongly to October order books. DAP suppliers were obliged to reduce prices to a level acceptable to Indian importers who are facing all-time lows in the rupee-USD exchange rate, although with an increase in the maximum DAP retail price partially offsetting this, the extent of the price fall was limited. About 500,000 mt were booked in the mid/high $420s CFR, which compares to $429 to $430 CFR at the end of August.

Meanwhile, U.S. barge prices continued to appreciate through September (see Domestic below). However, higher freight rates to Brazil meant U.S. export netbacks declined to $429 to $438 mt FOB from $433 to $439 last month.

The short-term outlook calls for steady-to-firm prices in the west and stable-to-soft in the east.

Domestic

Prices for DAP and MAP barges increased to $421 to $425/t FOB NOLA and $430 to $432, respectively, compared to $415 to $417 and $420 to $425 in late August. Buyers have been stepping in for last-minute purchases ahead of river close and the fall application season. Supply remains relatively tight with increased import volumes not quite making up for Mosaic's closure of Plant City.

River terminal prices are up about $10 from last month to around $450 to $455/t FOB for DAP and $460 to $465 for MAP. Physical values for forward months are flat from current values or a slight discount. New prompt sales are slow with dealers yet to move through previously bought tons. Suppliers expect dealers will be back for hand-to-mouth purchases shortly. There is concern that application rates may be cut this fall, but so far there is no evidence to suggest this is the case.

The short-term outlook for phosphate prices is mostly stable basis end user demand ramping up. But with considerable imports lined up for arrival over the next four weeks there is downside risk for prices, especially at NOLA. Barge prices at NOLA are currently very attractive and sellers may soon begin taking profits before international producers target this market with additional cargoes. River close is also quickly approaching, which will cut off segments of demand on the upper Mississippi River. That being said, the supply-demand balance for the fall application season still looks fairly tight, so upriver and inland pricing may gain a premium to NOLA at some point in early Q4.

POTASH

Domestic potash prices are firming ahead of the fall application season. Mosaic and Nutrien pulled all offers in late September but so far only the former has come back to the market with a $15 increase. It is somewhat strange that Nutrien has not matched Mosaic's offers, and there is plenty of speculation as to why, but the bottom line is that a similar price increase is expected.

In the meantime, potash prices continue to firm. Barges traded at a higher $265 to $270/t FOB NOLA, up from $260 to $270 in late August. River terminals are gradually firming up to the new price level. Most offers fall within the $290 to $300/t FOB range but some wholesalers who got in early are often still willing to sell $285. Cheaper offers are expected to dissipate as the fall application season progresses and dealers return for hand-to-mouth purchases.

The price outlook is firm. Producers will likely achieve higher asking prices when buyers return to the market.

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

(CZ/ES)