Ammonia costs spike sharply higher Nitrogen prices disrupt calm in fertilizer market By Bryce Knorr, grain market analyst

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1 Ammonia costs spike sharply higher Nitrogen prices disrupt calm in fertilizer market By Bryce Knorr, grain market analyst Ammonia joined other forms of nitrogen in the parade of higher costs, with contracts for February settling almost 3% higher. Increased domestic production in the U.S. isn t coming online fast enough to offset an international supply chain filled with constraints. Ammonia prices will be some $63.5 higher at the Gulf this week, the third month in a row of higher costs that increased the official settlement price a ton to $ That could take the average cost of ammonia to $55, fully above our current average. With central Corn Belt retail prices running close to already, the potential increase could put even more pressure on growers to switch to soybeans or in-season nitrogen applications for corn. In addition to rising costs for UAN and urea this winter, lack of shipments out of the Black Sea caused prices from the Middle East to rise sharply as well. Urea prices slowed their pace of gains but still continued to rise last week. Costs at the Gulf showed signs of weakening, causing some imports to be diverted to higher priced markets and in term forcing prices back higher here too. The $253 index price at the Gulf was up $4 and translates into a retail cost of almost, compared to our current retail average of $342, which was little changed. Swaps out of the Black Sea and Gulf for March suggest the market could rise around $5 more before slowly starting to work back lower again. Traders will be watching suppliers in China when markets there reopen after Lunar New Year holidays to see if exports start flowing again. China makes its supplies from coal, which was caught in a speculative bubble of rising prices last fall. Coal prices are down, but still more than double year-ago values, which could keep exports limited. UAN prices are also continuing to rise, up $2.5 last week on the index for 32% at the Gulf and set to move another $22.5 higher by March. The deferred price of $192.5 translates into a retail cost for 28% of $275, $55 higher than our current retail average. UAN is said to be in short supply as growers delayed nitrogen purchases, and the increases could put plans for sidedressing at risk. Phosphates showed a few signs of life last week, after staying very quiet compared to other nutrients this winter. India was back in the market and bad weather is delaying shipments out of Morocco, with U.S. exports rising too. The Gulf DAP price was up $3.5 to $313.45, which translates into a retail cost of $475, around $6 higher than current retail prices average, which gained around $1. Swaps show potential for the Gulf price to move another $1 higher into March, with only modest price reductions into summer. Potash prices were fairly quiet on both retail and wholesale markets, though there s potential for higher prices for growers yet to book supplies. The average retail price is running around $312, up $1 last week. But that s $4 less than suggested by the current Midwest wholesale price of $247, which was steady. March prices are a little higher, suggesting a market that s firm for now, at least in the U.S.

2 Retail Fertilizer Prices DAP Potash Urea Ammonia $7 $65 $55 $45 $35 Iowa Fertilizer Prices per ton $85 $75 $65 $55 $45 $35 $25 Jan 11 Jan 13 Jan 15 Jan 17 Source: USDA Ammonia Urea MAP Potash $1,2 Illinois Fertilizer Prices Ammonia DAP Potash Urea $1, per ton Sep 8 Sep 1 Sep 12 Sep 14 Sep 16 Source: USDA

3 per short ton $9 $7 Ammonia vs Corn Gulf Ammonia Nearby Corn $9. $8. $7. $6. $5. $4. $3. $2. $1. $ $ per bushel 35, 3, 25, 2, 15, 1, 5, U.S. Ammonia Stocks year end, metric tons N Source: USGS

4 U.S. Ammonia Inventories vs Price $9 $7 $ Apr/4 Nov/4 Jun/5 Jan/6 Aug/6 Mar/7 Oct/7 May/8 Dec/8 Jul/9 Feb/1 Sep/1 Apr/11 Nov/11 Jun/12 Jan/13 Aug/13 Mar/14 Oct/14 May/15 Dec/15 Jul/16 million short tons Inventory Gulf Price $775 $675 $575 $475 $375 $275 $175 Ammonia Retail Gulf

5 $9 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 $55 $45 $35 $25 $15 Urea Retail Gulf U.S. Urea Inventories vs Price Inventory Gulf Price $7 $ Jan/2 Nov/2 Sep/3 Jul/4 May/5 Mar/6 Jan/7 Nov/7 Sep/8 Jul/9 million short tons May/1 Mar/11 Jan/12 Nov/12 Sep/13 Jul/14 May/15 Mar/16 Gulf Urea Swaps Curve $27 $26 $25 $24 $23 $22 $21 17 Feb 17 May 17 Aug 17 Nov 18 Feb 18 May 18 Aug

7 Black Sea Urea Ave. $35 per metric ton $25 $15 Jan Mar May Jul Sep Nov Average $7 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.

8 $375 UAN Retail 28% Gulf 32% $325 $275 $225 $175 $125 U.S. UAN Inventories vs Price 1.6 Inventory Gulf Price million short tons $ Apr/4 Dec/4 Aug/5 Apr/6 Dec/6 Aug/7 Apr/8 Dec/8 Aug/9 Apr/1 Dec/1 Aug/11 Apr/12 Dec/12 Aug/13 Apr/14 Dec/14 Aug/15 Apr/16 Gulf UAN (32%) Swaps Curve $19 $18 $17 $16 $15 $14 $13 $12 17 Feb 17 Apr 17 Jun 17 Aug 17 Oct 17 Dec

9 $28 $26 $24 $22 $18 $16 $14 $12 UAN Gulf Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Farmgate UAN 28% April price per ton $45 $35 $25 $15 $5 $ 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.

10 $55 $45 $35 $25 DAP Retail Gulf million metric tons U.S. MAP/DAP Inventories vs Price Inventory Gulf DAP Price $1,2 $1, $ Apr/5 Nov/5 Jun/6 Jan/7 Aug/7 Mar/8 Oct/8 May/9 Dec/9 Jul/1 Feb/11 Sep/11 Apr/12 Nov/12 Jun/13 Jan/14 Aug/14 Mar/15 Oct/15 May/16 45,, 4,, 35,, 3,, 25,, 2,, 15,, 1,, 5,, U.S. Phosphate Rock Consumption metric tons

11 Gulf DAP Swaps Curve $326 $324 $322 $32 $318 $316 $314 $312 $31 $38 $36 17 Feb 17 Apr 17 Jun 17 Aug 17 Oct 17 Dec Tampa DAP metric ton Ave $48 $46 $44 $42 $38 $36 $34 $32

12 per ton $9 $7 $- 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.

13 $56 $51 $46 $41 $36 $31 $26 $21 Retail Potash Midwest Terminal million metric tons North American Potash Inventories vs Price Inventory Midwest Price Jan/ Oct/ Jul/1 Apr/2 Jan/3 Oct/3 Jul/4 Apr/5 Jan/6 Oct/6 Jul/7 Apr/8 Jan/9 Oct/9 Jul/1 Apr/11 Jan/12 Oct/12 Jul/13 Apr/14 Jan/15 Oct/15 Jul/16 $1, $ U.S. Potash Consumption metric tons 8,, 7,, 6,, 5,, 4,, 3,, 2,, 1,,

14 Midwest Potash $/st Average $ $ $ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec per ton $9 $7 $- 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.