Urea jumps 10% as fertilizer market looks for bottom
Published: Nov 6, 2013
A battered fertilizer market was good news for farmers who've seen crop prices fall sharply this year. But a 10% jump in urea prices paced a nutrient complex that's trying hard to establish a bottom as corporate giants release disappointing earnings.
Ammonia prices remain quiet, with Midwest wholesalers steady again after a $15 bump higher in September and October. While a few dealers on the Plains last month were down to $575, most new offer sheets are coming in around $610 to $615 out west. Prices remain higher to the east. USDA put the average in Iowa at $655 this week, though the low end of the price range was down to $620. Our fair value projection based on wholesale costs continues to run around $670, but fundamentals suggest a range of $590 to $650, so the market appears aligned with the new reality of lower acreage and crop prices.
Urea prices are running $26.50 a ton higher at the Gulf this week, with an increase last week followed by another move higher Monday in the swaps market. Costs out of the Black Sea also rose, though more modestly, going up $13 to $281. The increase is a bit steep all at once, but a firm market is not unusual seasonally this time of year, as big international buyers begin making deals. India is working its latest purchase, which could set the tone for the market headed into the end of the year. Retail prices are averaging $425, right in line with our fair value projection based on the current wholesale market, though some dealers are around $390. Updated price sheets are coming in around $410 to $415 on the Plains. Fundamentals point to prices around $450, so the market may have been oversold earlier. Swaps now point to firm prices at the Gulf into spring.
UAN was steady yet again this week, leaving the Gulf index for 32% unchanged at $222.50 for the fourth straight week. Wholesale offers upriver were steady as well. Gulf swaps into the end of winter are higher, with carry running $10. Current wholesale costs translate into a fair value around $305 for 28%, about $5 cheaper than indicated now by fundamentals. The bottom of the retail market is around $285, though new offer sheets on the Plains are at $310 to $315.
Phosphates broke $20 last week at the Gulf, but started firming along with some of the other contracts this week, with the Gulf now trading at $355 in the swaps market for DAP. Forward swaps remain cheaper, but also posted gains, as buyers are finally starting to step in to take advantage of the price break. USDA put the average in Iowa this week at $547 for DAP, but the average retail price is running around $520, the bottom of the Iowa range. Fair value based on wholesale costs still seems like it should be cheaper, around $470, with fundamentals pointing even lower, down to $435. However, only a few dealers are running as low as $485.
Potash was steady at the Gulf at $342.50, with Midwest wholesale price also unchanged at $382.50. The cheapest price seen on retail markets remains $440. USDA put the average in Iowa this week at $482.50, with the cheapest price there at $450. Current wholesale costs suggest a retail price of $467, right around fundamental value. Prices could drop up to $40 if U.S. wholesale costs were to fall to the level of the world market, which appears unlikely. Prices aren't likely to rise until China steps into to buy this winter, which should set the tone for the market headed into spring.
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