Fertilizer rally shows signs of cracks Better weather a good news/bad news story for applications By Bryce Knorr, grain market analyst

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1 Fertilizer rally shows signs of cracks Better weather a good news/bad news story for applications By Bryce Knorr, grain market analyst Better weather as October ends has farmers back in the field for harvest. But improved prospects for fall applications muted the impact of the first cracks in what has been a solid rally in fertilizer prices since summer. Ammonia costs for growers looking for product firmed over the past week, and the fall needs appear to be driving the market. The pace of harvest has been relatively slow in the western Corn Belt, and wholesale values there actually dropped a little. But better progress elsewhere firmed terminal costs. Our average retail price is up to $497.50, but could have more upside since it still lags behind replacement costs. International prices have been flat lately thanks to a urea market starting to pull back, which could keep the Gulf index steady at $322 when November contracts settle. Urea is cooling off a little after a meteoric rise of more than 50% on global markets over the spring and summer. Still uncertain is whether this is just a normal, and relatively small, correction, or the start of a larger trend. Whatever the answer to that question is, retail prices for farmers remain near three-year highs, though our average pulled back 50 cents to. That s just $10 below replacement costs for November, so in theory, growers looking for supplies may not have to pay more. Traffic is moving again along the river system, helping prices ease a little but only dealers on northern stretches closing soon may feel pressure to restock. Swaps for November through March at the Gulf are around, suggesting prices could stay high this winter. UAN isn t in high demand, so it s a market that remains quiet. But growers putting together budgets or looking for spending opportunities for tax purposes might be able secure some deals. Our retail average for 28% is around $241, which looks cheap according to replacement costs. Those are running around, based on spot market and swaps trade at the Gulf for 32%, which is trading around $215. Phosphate costs have been rising steadily for around 18 months, with only a few pauses. The wholesale market took another one of those breaks last week, though retail charges remain firm as growers pick up the pace of applications. Our average retail value for DAP edged $1 higher to $515, which is close to replacement cost based on Gulf costs that broke $2.50 to $417. Thinly traded swaps at the Gulf show potential for another pullback into December, but retail expenses could stay at $500 or better unless the nitrogen component of products really hits the skids. Potash remains The Little Engine That Could of the fertilizer complex, chugging higher again into the end of October. Costs at the Gulf and Midwest terminals rose $5, to $291 and $318 respectively. Our current average price is up to $368, but most markets appear to be running $375 to, closer to the projected replacement cost of $408. Actual costs will vary depending on distance from the terminal, but demand looks good. 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

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

7 $320 $310 $290 $280 $270 $260 $240 $230 $220 Gulf Urea Swaps Curve 1 Oct 1 Nov 1 Dec 1 Jan 1 Feb 1 Mar 1 Apr 1 May

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 $220 $218 $216 $214 $212 $210 $208 $206 $204 $202 Gulf UAN (32%) Swaps Curve 18 Oct 18 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

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 $ Oct 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