August in Charts: Nutrient Slides as Fuels Perk Up
Aug 30, 2013
Nutrient moved decidedly lower over the course of the last month. The charts below tell the tale. The most solid declines came in phosphate and potash while the only increases came from fuels and a mid-month turnaround in September natural gas. The outlook is for more downside action across the nutrient board and for fuels and natural gas to continue to creep higher.
--The charts below represent retail pricing movements in regionwide averages as recorded by your Inputs Monitor from July 29, 2013 through August 30, 2013.
Nitrogen - Urea made headlines for nearly a year, falling $165.00/ton from July 1, 2012 to July 1, 2013. This was due to Chinese oversupply which continues today with capacity additions in Chinese Urea production in the works for this year. The real story has been the falloff in anhydrous pricing over the month and while some states fell more than others, we expect the entire Corn Belt to see prices fade farther.
August price slide -- Anhydrous fell $34.29 to a regional average of of $752.62. The nationwide low here is in Kansas at $661.94/ton. Urea fell $16.92, slowing its downward trajectory to $508.77/ton with the low in the state of North Dakota at $444.23/ton.
Solutions emerge from late season demand with UAN28% down $31.55 to $355.67/ton and 32% $18.22 lower to $393.81/ton. Nutrient management may see UAN solutions gain popularity in the next few years as growers look to increase N efficiency, and sidedress becomes a staple application on more farms.
P&K -- Phosphate and potash are under the greatest amount of pressure of all the products we survey. Phosphate is pressured by declines in the Indian currency, the rupee, and as the world's largest phosphate buyer looks to utilize phosphate stocks already on hand, very little product is moving at present. Declines in ammonia as a feedstock for phosphate production are widening margins for U.S. producers, and 90% of the phosphate applied in the U.S. will be from domestic stores.
Potash is a mystery. A lot of guys believe the demise of the Belarus Potash Company at the hands of Uralkali will force potash prices $100.00/ton lower. But the Belorussians have captured Uralkali CEO Baumgertner and intend to try their Russian former partner for abuse of power. Baumgertner faces up to 10 years in prison. Others from the Uralkali syndicate are sought for arrest and Belarus says it will pursue damages from Uralkali in the amount of USD $100 million. Stock in Uralkali fell an immediate 4.3%, and if this episode slows Uralkali's plans to win marketshare away from Belarus through high volume, global potash price declines will be limited.
August price slide -- DAP fell $30.00 even to $583.33/ton with Wisconsin posting a regionwide low of $499.92/ton. MAP moved $19.81 lower to $610.45/ton with the low observed in South Dakota at $583.49/ton. Potash fell $19.98 to $538.25/ton with the regionwide low in the state of Wisconsin at $484.82/ton.
Fuels -- We have observed price increases in farm diesel, natural gas and LP over the past month and we believe the annual upward trend for farm fuels is underway. Last year we saw similar movement in which fuels moved higher through harvest and gave a little ground again right around Christmas. We have advised to book fuels before they get away from us, and this month's increases suggest time's-a-wastin'. A wet harvest is expected and will increase demand for dryer fuels like LP and natgas.
Distillate stocks are at the bottom end of the five-year average and I know it seems early to point out the competition between home heating oil and #2 diesel, but with stocks so low against the five-year, competition for home heat will support higher diesel pricing starting at the first frost.
The same is expected of natural gas, but if WTI crude spikes on a U.S. led attack on Syria, traders will look to cash in on the spike and a round of high level profit taking could eliminate any gains injected into WTI by the fear factor. This would raise the price of natural gas proportionally to the ensuing WTI downside move.
Propane stocks are good, but not great and a surge in demand could easily elevate prices here in a hurry. Propane supplies are currently dead center in the five-year average, but down 9.5 million barrels from the same time last year. Home heat will hold sway here as well, but stocks are higher than they are for farm diesel. We expect LP prices to continue to move higher from here on out.
August price hike -- Farm diesel added 4 1/4 cents all told during the month of August to end at a regionwide average of $3.421/gallon -- but according to last year's movements, Ruby red still has another 23 cents in upside risk in the next few weeks. LP added 4 3/4 cents on the month to $1.388. September natural gas -- now expired, as the October contract is now in play -- threatens the most aggressive increase adding 14 1/4 cents during the month opening August 1 at $3.477 and opening August 30 at $3.62.
World scale events are impacting nutrient pricing in the United States. Oversupply by Chinese producers, declining currency in India and a potash CEO jailed by Europe's last dictator are all weighing on their respective markets in our favor. Add to that lagging corn futures and we have a recipe for low fertilizer pricing in the short-term. How long the slope will last is unknown, and will likely be dictated by weather and Wall Street.
But much of the industry believes the price slide will continue into January. The opposite is true of farm diesel and LP -- natgas is a bit of a wild card. We expect farm fuels, including natgas to move higher for roughly the same period.
If you have yet to book farm diesel and LP get on it. Natgas has a little more wiggle room in it and if your appetite for risk allows, you may want to hold out and see how the Syria situation pans out for natural gas. But upside risk is real for all three -- if you want to gamble for $2.00 natgas, do yourself a favor and book a portion at current prices in case prices move higher near-term.
As always, local prices vary so check with your preferred retailer, and stay tuned to your Inputs Monitor for the best fertilizer and fuels news and advice.