Good news from China China returns to fertilizer market as a seller, increasing supplies By Bryce Knorr, grain market analyst

Transcription

1 Good news from China China returns to fertilizer market as a seller, increasing supplies By Bryce Knorr, grain market analyst Farmers have heard mostly bearish news about China in the second half of But the latest news emanating from the world s largest country could offset the pain of tariffs a little. After retreating from the fertilizer market this year China is again selling urea, helping pressure prices lower last week. Ammonia costs held steady during Thanksgiving week. But after trading for two months nearly $90 above spring lows, prices should be headed lower into winter. Ammonia typically follows urea because plants divert feedstocks to make 46% when urea prices offer good margins. But the pullback in urea, coupled with a fall application season hampered by a slow harvest and now snow should help both wholesale and retail prices moderate. While our average retail price of $497 is below replacement costs at current prices, a pullback in wholesale markets could keep a lid on suppliers offers. USDA reported the average cost in Illinois last week at $525, close to our projected replacement value. The wild card could be any disruption to supplies out of the Black Sea after Russia fired on Ukrainian Navy vessels over the weekend. Urea is at a key junction headed into December. International prices wobbled as results of the latest tender from India came in, dropping when sellers lowered prices, then briefly trying to firm when volumes involved in the deals hit 1.8 MMT. But news China was selling again tipped the scales lower, with prices at the Gulf down another $3 last week to $285.45, $22 off mid-october highs. China stopped selling as plants cut production to curb pollution and lost natural gas feedstocks diverted to heating during a cold winter. Our average retail price is only down about $1, but at $ is at least fairly priced based on replacement costs, with new offers running $380 to $415 as some suppliers cut prices a little. The direction of prices over the winter could depend on demand as well as supply, if lack of fall ammonia applications increase urea demand for spring. UAN saw mixed trade ahead of Thanksgiving. While retail prices are slowly getting caught up with increased wholesale expenses, not all dealers were hiking prices. That patience likely will be tested into winter, because the cost of 32% at the Gulf is up $67 from summer lows, going up $5 last week to $227. That translates into a retail price for 28% of $280 to. Demand from growers won t surface until later in 2019, which could keep the market muted for now. Phosphate costs should pull back a little this winter. Though little appears to be happening on the retail level, wholesale markets retreated due to lower prices for the nitrogen component of products. The price of DAP at the Gulf dropped $1 to $407 last week, which translates into a retail replacement value of $506, $10 below our average price from dealers. New offer sheets are running around $510, with December swaps indicating another $5 downside for now. Prices could be headed lower due to bad weather for applications and expectations imports will rise. Potash showed a little fluctuation into Thanksgiving. While Midwest terminals trimmed costs $1 to $318 due to slow demand, retail prices headed the other way as some dealers raised prices to reflect the higher fall trend in the global market. Our average retail price rose $1 to $369. That still looks too cheap compared to replacement costs, which could be or more. For more information about national and international fertilizer markets, go to Fertecon.com.

2 Iowa Fertilizer Prices $850 $750 per ton $650 $550 $450 $350 Jan 11 Jan 13 Jan 15 Jan 17 Source: USDA Ammonia Urea MAP Potash $1,200 Illinois Fertilizer Prices Ammonia DAP Potash Urea $1,000 per ton $800 $600 Sep 08 Sep 10 Sep 12 Sep 14 Sep 16 Sep 18 Source: USDA

3 per short ton $900 $800 $700 $600 $500 $100 Ammonia vs Corn Gulf Ammonia Nearby Corn $ $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 per bushel AMMONIA IMPORTS/EXPORTS metric tons 600, ,000 Exports Imports 400, , , ,000 0 F-16 S-16 O-16 N-16 D-16 F-17 S-17 O-17 N-17 D-17 F-18 S-18

4 $750 $650 $550 $450 $350 $150 Ammonia Retail Gulf per ton $900 $800 $700 $600 $500 $100 $- Farmgate Ammonia April price Source: USDA, Farm Futures NOTE: Fair Values are projections of what current farmgate cost of product should be, based on international wholesale price points.

5 $550 $500 $450 $350 $150 Urea Retail Gulf $700 Farmgate Urea April price $600 $ per ton $100 $- Source: USDA, Farm Futures NOTE: Fair Values are projections of what current farmgate cost of product should be, based on international wholesale price points.

6 per metric ton Black Sea Urea Ave. $350 $330 $310 $290 $270 $230 $210 $190 $170 $150 Jan Mar May Jul Sep Nov Average UREA IMPORTS/EXPORTS metric tons 1,400,000 1,200,000 1,000, , , , ,000 Exports Imports 0 F-16 S-16 O-16 N-16 D-16 F-17 S-17 O-17 N-17 D-17 F-18 S-18

7 $290 $280 $270 $260 $240 $230 $220 Gulf Urea Swaps Curve 1 Nov 1 Dec 1 Jan 1 Feb 1 Mar 1 Apr 1 May 1 Jun

8 UAN $365 Retail 28% Gulf 32% $315 $265 $215 $165 $115 per ton $450 $350 $150 $100 $50 $- Farmgate UAN 28% April price Source: Farm Futures NOTE: Fair Values are projections of what current farmgate cost of product should be, based on international wholesale price points.

9 $225 Gulf UAN (32%) Swaps Curve $220 $215 $210 $ Nov 18 Dec 19 Jan 19 Feb 19 Mar 19 Apr 19 May 19 Jun $280 $260 $240 $220 $180 $160 $140 $120 UAN Gulf Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

10 metric tons 450, , , , , , , ,000 50,000 0 UAN IMPORTS/EXPORTS Exports Imports F-16 S-16 O-16 N-16 D-16 F-17 S-17 O-17 N-17 D-17 F-18 S-18

11 $550 $500 $450 $350 Retail DAP Gulf per ton $900 $800 $700 $600 $500 $100 $- Farmgate DAP April price Source: USDA, Farm Futures NOTE: Fair Values are projections of what current farmgate cost of product should be, based on international wholesale price points.

12 Gulf DAP Swaps Curve $440 $435 $430 $425 $420 $415 $410 $405 $ Nov 18 Dec Tampa DAP metric ton $460 $440 $420 $380 $360 $340 $ Ave

13 Potash $560 $510 $460 $410 $360 $310 $260 $210 Retail Midwest Terminal Farmgate Potash April price $900 $800 $700 $600 per ton $ $100 $- Source: USDA, Farm Futures NOTE: Fair Values are projections of what current farmgate cost of product should be, based on international wholesale price points.

14 Midwest Potash $/st $350 Average Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec POTASH IMPORTS/EXPORTS metric tons 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 Exports Imports 0 F-16 S-16 O-16 N-16 D-16 F-17 S-17 O-17 N-17 D-17 F-18 S-18