Fertilizer prices shoot higher in 2018 New offer sheets pass on higher international costs to farmers By Bryce Knorr, grain market analyst

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1 Fertilizer prices shoot higher in 2018 New offer sheets pass on higher international costs to farmers By Bryce Knorr, grain market analyst Dealers are ringing in the New Year with updated price sheets that show higher costs for most nutrients, reflecting the fall rally on the global fertilizer market. While nitrogen continues to pace the round of increases, potash and phosphates also have a firmer tone as 2018 begins. Ammonia shot higher as some dealers posted new prices for the first time since the market took off last fall. With the average retail cost of anhydrous now around $460, local charges have made up some, but not all of the ground previously paved by increases in wholesale values. Costs on the Plains are running $450 to $495 and values further east are mostly higher. Though some new price sheets in Illinois are as low as $435, the average reported by USDA before Christmas was $490, $72 higher than earlier in the month. Fundamentals still point to costs above but further advances could depend on whether corn growers balk at higher prices due to poor profit prospects and switch to soybeans. Urea took another step higher into 2018, thanks to a tender by India before Christmas that raised offers from producers. Closure of plants in China to combat pollution a chronic problem in winter there has removed an important source of supply from world markets, despite the increase in capacity coming on in the U.S. That sent the index at the Gulf back to its highs for the year around $252. The higher wholesale cost translates into potential for retail prices to reach close to, which is also the target suggested by current fundamentals. Average retail values are still a little below $330, but reflect some dealers that have not boosted prices recently. Retailers updating offer sheets at year-end were more in the $335 to $350 range. Swaps show mostly steady prices through March before costs could ease seasonally. UAN continues to follow the rest of the nitrogen complex higher, though most dealers aren t posting new prices yet. The index for 32% at the Gulf is up to $167.50, with costs into spring another $10 higher. That translates into an average retail cost for 28% around $245, while dealers posting new prices at year end were mostly at $220 to $235. However, some were still below, suggesting leftover supplies still available at a discount. Phosphates also edged higher on retail markets as more dealers put out new offers, taking the cost of DAP on average to nearly $447. Prices could still have some upside as demand surfaces, with wholesale costs suggesting prices could be $480 over the winter before easing into spring. Higher nitrogen costs are impacting the compound fertilizer market, though overall phosphate supplies are strong. Potash continues to ratchet higher on the retail level, as wholesale prices remain supported by production cutbacks by some Canadian producers. Dealers resetting prices raised the average cost to $327.60, in line with current wholesale values.

2 Iowa Fertilizer Prices per ton $850 $750 $650 $550 $450 $350 $250 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Source: USDA Ammonia Urea MAP Potash $1,200 Illinois Fertilizer Prices Ammonia DAP Potash Urea $1,000 per ton Sep 08 Sep 10 Sep 12 Sep 14 Sep 16 Source: USDA

3 per short ton $900 $700 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 500,000 U.S. Ammonia Stocks year end, metric tons N 400, , , ,000 0 Source: USGS

4 U.S. Ammonia Inventories vs Price million short tons $900 $700 $0 Apr/04 Nov/04 Jun/05 Jan/06 Aug/06 Mar/07 Oct/07 May/08 Dec/08 Jul/09 Feb/10 Sep/10 Apr/11 Nov/11 Jun/12 Jan/13 Aug/13 Mar/14 Oct/14 May/15 Dec/15 Jul/16 Feb/17 Inventory Gulf Price $750 $650 $550 $450 $350 $250 $150 Ammonia Retail Gulf

5 $900 Farmgate Ammonia April price $ per ton $- Source: USDA, Farm Futures NOTE: Fair Values are projections of what current farmgate cost of product should be, based on international wholesale price points. Midwest/S. Plains are based off supply and demand factors.

6 $550 $450 $350 $250 $150 Urea Retail Gulf million short tons U.S. Urea Inventories vs Price Inventory Gulf Price Jan/02 Nov/02 Sep/03 Jul/04 May/05 Mar/06 Jan/07 Nov/07 Sep/08 Jul/09 May/10 Mar/11 Jan/12 Nov/12 Sep/13 Jul/14 May/15 Mar/16 Jan/17 $700 $0

7 Gulf Urea Swaps Curve $270 $250 $230 $210 $190 $170 $ Jan 18 Mar 18 May JLY Sep 18 Nov 19 Jan 19 Mar 19 May per metric ton Black Sea Urea Ave. $350 $330 $310 $290 $270 $250 $230 $210 $190 $170 $150 Jan Mar May Jul Sep Nov Average

8 $700 Farmgate Urea April price per ton $- Source: USDA, Farm Futures NOTE: Fair Values are projections of what current farmgate cost of product should be, based on international wholesale price points. Fundamentals are projections made off current supply and demand factors.

9 UAN Retail 28% Gulf 32% $365 $315 $265 $215 $165 $115 U.S. UAN Inventories vs Price 1.6 Inventory Gulf Price $0 Apr/04 Jan/05 Oct/05 Jul/06 Apr/07 Jan/08 Oct/08 Jul/09 Apr/10 Jan/11 Oct/11 Jul/12 Apr/13 Jan/14 Oct/14 Jul/15 Apr/16 Jan/17 million short tons

10 $185 Gulf UAN (32%) Swaps Curve $175 $165 $155 $145 $135 $125 $ Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun $280 $260 $240 $220 $180 $160 $140 $120 UAN Gulf Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

11 Farmgate UAN 28% April price per ton $450 $350 $250 $150 $50 $ Source: Farm Futures NOTE: Fair Values are projections of what current farmgate cost of product should be, based on international wholesale price points. Fundamentals are projections made off current supply and demand factors.

12 $550 $450 $350 $250 DAP Retail Gulf million metric tons U.S. MAP/DAP Inventories vs Price Inventory Gulf DAP Price Apr/05 Nov/05 Jun/06 Jan/07 Aug/07 Mar/08 Oct/08 May/09 Dec/09 Jul/10 Feb/11 Sep/11 Apr/12 Nov/12 Jun/13 Jan/14 Aug/14 Mar/15 Oct/15 May/16 Dec/16 Jul/17 $1,200 $1,000 $0

13 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 U.S. Phosphate Rock Consumption metric tons $364 Gulf DAP Swaps Curve $362 $360 $358 $356 $354 $352 $ Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun

14 Tampa DAP metric ton Ave $480 $460 $440 $420 $380 $360 $340 $320 per ton $900 $700 $- 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. Fundamentals are projections made off current supply and demand factors.

15 $560 $510 $460 $410 $360 $310 $260 $210 Retail Potash Midwest Terminal million metric tons North American Potash Inventories vs Price Inventory Midwest Price Jan/00 Nov/00 Sep/01 Jul/02 May/03 Mar/04 Jan/05 Nov/05 Sep/06 Jul/07 May/08 Mar/09 Jan/10 Nov/10 Sep/11 Jul/12 May/13 Mar/14 Jan/15 Nov/15 Sep/16 Jul/17 $1,000 $0

16 U.S. Potash Consumption metric tons 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000, Midwest Potash $/st Average $ $ $ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

17 per ton $900 $700 $- Farmgate Potash 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. Fundamentals are projections made off current supply and demand factors.