A Hat Trick of Hardship

April 4, 2014 11:01 AM
 

 

Expect fertilizer deliveries to be problematic as the spring applications season bears down on corn country. The problem is mainly a rail issue, but ammonia pipelines extending from the southern U.S. are having problems delivering product.

Adding to the difficulty is the temporary closure of an undisclosed urea and ammonia plant in Canada, and a force majeure at a southern U.S. nitrogen plant. This has put a crimp on fresh supplies from the production end. Phosphate loading is still hampered in Moroccan ports by rough seas, and Canadian potash is all but lost in Canadian rail logjams.8017005631 ba316d8f10 m

The Canadian bumper 2013 crop is in line behind Canadian crude oil shipments with other chemicals, including fertilizer, in line third. The cantankerous winter weather also forced rail companies to reduce the number of cars pulled by each locomotive. That increased congestion at railheads and loading/unloading facilities.

The result has been pockets of limited supply, and an expert told the Monitor this afternoon that his firm expects delays of up to three weeks, possibly longer by the time fertilizer shipments make it to your locale. As one would expect, the spotty supplies have led to localized price spikes, and adds a strong element of upside price risk across the entire Corn Belt.

By the way -- we've got $5.06 3/4 Dec corn, in case you hadn't noticed. A rally in corn futures is often a signal of higher pricing ahead for fertilizer.

Working in growers' favor -- you probably won't hear this shaded as a positive anyplace else -- is the potential for a delayed planting season. That would give suppliers a chance to restock and if there are price increases attached, it may only take a few weeks for prices to come back down from a knee-jerk price response. The timing of that, however, isn't likely to cooperate. This year, once fertilizers have gotten the chance to run higher, they have.

Near-term, the outlook calls for a price response to the highside. This week, Iowa and Indiana NH3 is up $20.00; Illinois, Wisconsin, Minnesota and North Dakota are all up $10.00 by the ton. Not huge increases, but the current supply and distribution trouble comes as fertilizer prices need no more reason to run higher. We fully expect anhydrous ammonia to run higher with phosphate registering second on our upward price risk list... but then a reader tweeted that his fert guy was having trouble getting potash in from the local railhead.

Looks like a hat trick of upside risk across the board.

Clogged rail lines leading dealers to send trucks down the road to scrape up some fertilizer adds the cost of diesel and drivers to nutrient prices. Limited supply forges a seller's market at higher prices on strong demand. Our readers are filled on spring anhydrous and phosphate with 20% to go on potash. We will pull the potash trigger on Monday if we note a price response. If you are not covered for spring nutrient, get on the stick today and have a conversation with your preferred retailer.

If you are among the lucky, your dealer will have plenty on hand. But a growing chorus of farmers and upstream experts see trouble ahead for fertilizer prices.


 

Photo credit: Dirigentens / Foter / Creative Commons Attribution 2.0 Generic (CC BY 2.0)

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