DTN Fertilizer Outlook
Domestic Wholesale Fertilizer Prices Mostly Steady to Lower in Short Term
Here is a breakdown of wholesale prices and trends of the various fertilizers:
AMMONIA
International:
Global ammonia prices remained soft for most of January but seemed to have bottomed out at least in the west by the end of the month.
Excess supply relative to demand has led to further weakening in the east. Despite turnarounds in Indonesia and Australia, there is still talk of one or two spot cargoes still needing a home. Far East cost and freight (CFR) prices fell to $308-$320 per metric ton (mt) at the end of January, compared to $330-$360 in late December.
In the west, Yara and Mosaic settled the Tampa, Florida, contract for February at $285 per mt CFR -- a rollover from January. Domestic ammonia prices in the U.S. are still relatively high, but on the downside, inventories are reported to be long and DAP prices are still soft. Yet, producers appear to be comfortable for now with no exports sales reported.
While the market seems flat for now, the global market still seems far from a major recovery with both urea and DAP prices still weak. Therefore, prices are expected to run steady in the short term.
Domestic:
Interior markets were quiet with prices mostly steady. Spring still seems distant with subzero temperatures prevalent across the Midwest late in the month. So far, producers continue to hold firm to their spring prepay offers at $525-$545 per ton (t) FOB (free on board -- the buyer pays for transportation of the goods). But buyers are wondering if the weakness seen in UAN and urea will begin to bleed into Corn Belt ammonia prices now that an early spring seems doubtful. There are also reports of some retailers purchasing more urea for spring, and less ammonia, due to the expected time crunch facing farmers preplant and the relative affordability of urea compared to ammonia this year. Prompt ship ammonia tons remain at a strong discount, though at this point, all available space appears to be filled, and most are waiting for spring.
Ex-plant prices (the price at the factory, not including any other charges, such as delivery or subsequent taxes) in the Southern Plains are reported higher at $400-$460/t FOB for prompt, compared to around $360 in late December. There is scattered demand emerging in central and northern Texas, and some traders are reporting that prompt offers are biddable.
On Jan. 31, Magellan Midstream Partners reported in its fourth quarter 2018 financial results that it has made the decision to discontinue commercial operations of the ammonia pipeline beginning in later 2019 due to the system's low profitability and the expected decline in anhydrous ammonia production.
The outlook is bearish for prompt prices but stable for Corn Belt prepay, at least in the short term.
UREA
International:
Global urea prices softened in January due to a smaller-than-expected tender purchase from India and continued slow demand in the U.S. and Brazil.
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Market sentiment was positive ahead of the Indian tender; however, the mood changed when 2.9 million metric tons (mmt) were offered at a time when India is likely to only buy around 500,000-800,000 metric tons (mt). The result of the tender was especially disappointing, as only 515,000 mt was eventually purchased, with very limited coverage from the Arab Gulf, while China saw most of the business.
Global prices reacted with buyers in Brazil and New Orleans, Louisiana, (NOLA) able to push prices down in their respective markets -- the latter being exacerbated by a dramatic cold snap. Brazilian CFR levels fell to $275-$280 per mt, compared to $290-$300 early in the month.
Demand elsewhere failed to surface, and North African FOB values fell to $257-$285 per mt, from $272-$300 per mt in early January.
The return of Chinese exports, albeit still somewhat reduced compared to previous years, and softening gas prices in key markets is pressuring prices lower and is expected to continue to do so in the medium term. That being said, seasonally increasing demand in the U.S. and Europe should help to keep prices mostly steady through February.
Domestic:
Barge prices continued their tumble in January with trade at $243-$250/t FOB during the last week of the month, as a polar vortex made its way into the Midwest and news on the international front remained bearish. Prices were down about $25 from early January. Weaker prices into Brazil continue to be a focal point for U.S. traders as U.S. supply for the season remains up to speed with last year. Many feel there is upside to the market once application is underway, but for now, weather remains the issue and there does not appear to be much improvement expected in the next 20 to 25 days.
River terminal prices are also softer, but remain at a pretty wide spread from NOLA, with most quotes around $285-$305/t FOB. Spring offers are showing less of a carry, with more sellers beginning to show flat pricing through the season. Overall, markets were quiet with buyers and sellers apparently hunkering down, waiting for the weather to improve.
The price outlook is slightly soft in the short term with pressure from recent imports against thin nearby demand. However, price support is expected when domestic end-user activity picks up later into February.
UAN
Domestic UAN prices continued to soften in January. Early in the month, CF dropped its major river terminal prompt prices by $20 to $220/t FOB for 32%. The price decrease did little to stimulate buying and likely gave more reason for buyers to continue deferring purchases. Some market participants are accrediting pressure from imports as the reason for CF's price drop, and it is thought that this will discourage further imports. Others believe it had to do with UAN being overvalued compared to urea or that CF is facing containment/sales issues. Overall, it seems all these reasons likely played a part.
Speculation continues in the market about when CF will announce spring prepay prices. Some market participants expect an announcement before the TFI Annual Meeting taking place in Orlando on Feb. 11-13. It remains to be seen whether the domestic producer will be bullish or bearish, having earlier this month dropped prompt prices.
The NOLA barge price has edged down slightly to $190-$200/t FOB NOLA.
East Coast activity re-emerged late in January after a period of inactivity with EuroChem selling 15,000 mt at $220-$225 per mt CFR for January shipment.
The price outlook for UAN is slightly soft in the short term. Wintery weather means an early spring is unlikely, suggesting a shorter ammonia application period. Retailers are reportedly expected to buy more urea and UAN instead of ammonia, which could provide support for prices.
PHOSPHATES
International
Global phosphate prices continued to weaken as supply outweighed seasonally slow demand. No market highlighted this more than the NOLA barge market.
DAP barge prices fell by about $25 through the month, eventually trading at $360/t FOB, compared to $388-$390 in early January. A lack of activity -- but more crucially a surge of imports -- has combined to pull the price down. January is estimated to have record phosphate imports, with around seven cargoes from Morocco alone. The lineup for February continues to grow. It is not just Moroccan metric tons that have flooded the market but also product from Mexico, Saudi Arabia and Russia. With more and more arriving, pressure has been building to move the metric tons through distribution channels, which saw low disappearance last fall due to a below-average application season.
Moving east of Suez, more DAP has been sold into India both from Saudi Arabia and China. The quantity of imported DAP purchased so far in the first quarter has been somewhat surprising given comfortable stock levels. But prices have continued to soften, falling about $10 from last month to around $406 per mt CFR.
Cheaper raw material costs (sulphur and ammonia), combined with seasonally slow global demand, is keeping the short-term price outlook soft.
Domestic:
As mentioned above, domestic phosphate barge prices were under pressure in January due to a never-ending armada of imports arriving. The price of DAP fell by about $25, while MAP declined by $30, with trades at $360-$365/t FOB and $365-$370, respectively, during the last week of the month. MAP has been fluctuating between a $0-$10 premium to DAP.
River terminal prices are generally off about $10, due to cheaper replacement costs, with DAP quoted at $405-$415/t FOB and $410-$420 for MAP. There is little buying interest being shown from dealers, as end-user activity is seasonally slow, and there appears to be little incentive to buy currently. There was some dry fertilizer being applied in eastern Kansas, southeast Nebraska and northwest Missouri during parts of the month when weather would allow. Texas also had a bump in activity as fields dry and farmers prepare to plant corn in February.
The outlook for phosphate prices is soft in the short term, considering buying interest is expected to continue to be low while imports appear to be strong. That being said, some price support is expected once spring applications take off.
POTASH
January brought conflicting trends to domestic potash prices. Early in the month, Canadian producers announced a $10 price increase for granular potash for prompt shipment through March, to be effective Jan. 16, bringing the new price to $330-$340/t FOB inland Midwest warehouse. This essentially gave customers an opportunity to book all they need for the first quarter ahead of the price increase, which most chose to do.
Despite bullish news from North American producers, barge prices at the Gulf softened with trade at $275-$285/t FOB during the last week of the month, compared to $285-$290 in late December. There is relatively little storage space available following a below-average fall application season, and retail demand is seasonally slow, limiting the need of buyers to reload. Additionally, areas of the Southern Plains and Midsouth, which could be doing some early application work, are not because of wet fields.
River terminal prices are unchanged from last month at $305-$320/t FOB, despite weakness in the barge market. These prices are not expected to be affected by the weakness in the barge market as the lower prices appear to be more of a function of slow demand outlook in the next 30 days against demurrage costs, rather than oversupply for the spring season.
The outlook for potash prices is steady in the short term, but prices are expected to firm up to producer-posted values during the spring season. Further out, depending on how the spring season progress, it seems likely that producers will be looking to discount prices for the summer fill period.
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Editor's Note: This information was supplied courtesy of Fertecon, Informa Agribusiness Intelligence.
(AG/BAS)
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