Weakness in corn futures and bulging storehouses have put a lid on the NPK jar and prices are expected to move lower for at least the next month. Increased demand late in the booking phase may inject some strength into NPK pricing, but the current supply side picture suggests limited upside potential and with corn futures in the tank, its a double whammy for retail fertilizer pricing.
Our numbers put the U.S. slightly long on N coming out of sidedress season, but the carryover is not enough to curtail production. In fact, upstream producers are optimistic about fertilizer consumption not only in the United States, but worldwide.
China continues to produce urea like its going out of style and is expected to add another 13 million tons of production capacity by the end of this year. This has forced urea dramatically lower over the last year, but by the pound, anhydrous is still the better value. Monsoon rains were few and far between in India last year, but reports are that the rains have returned and demand for urea will be high in that nation.
Look for urea and UAN solutions to move lower. Currently, urea is at $547.51/short ton in Midwest retail pricing; UAN28 is at $394.44 and UAN32 is currently at $435.49. Our current fall pricing targets are at $470/ton for urea, $375/ton for 28% and $420/ton for 32%.
Anhydrous is more difficult to figure, but we do see downside room opening up in the U.S. due to lagging corn futures. Anhydrous does not share the popularity of urea on the world scene, but accounts for roughly 30% of the N applied in America each year. The majority of that product comes from Trinidad with Canada and domestic production filling in the gaps.
We look for anhydrous to give a good $50/ton by the end of summer, but if any N product is going to be sticky at the top of its range, it will be anhydrous. Currently, NH3 is at $847.97 in your Inputs Monitor regional average. Our target is a Midwest average price of $800/ton. Current regional lows are found in Nebraska and Kansas, each at $750/ton.
DAP and MAP inventories are very high right now compared to the same time last year. The U.S. is a net exporter of P, and wholesalers report price declines over the last week landing wholesale prices roughly $100/ton below year-ago. Raw ammonia shed $20/ton upstream and declines in ammonia as a feedstock in DAP/MAP production will limit retail pricing by fall.
Current inventories are 41% above year-ago and 18% above the five-year average. Expected demand will follow corn pricing as the industry believes P&K applications have banked some nutrient over the past two years. This will limit pricing as much as December corn futures and strong inventories.
We look for DAP to wind up averaging $600/ton in the Midwest by fall with MAP just a bit higher at $615/ton. The current low is in Wisconsin at $582.29 with Kansas not far behind at $592.04/ton.
Oversupply is in effect here as well, but inventories have dipped to 10% below the same time last year. However, limited sendouts to India and China late last summer temporarily skewed pricing and supply. Against the five-year average, potash is still 14% above.
Current pricing is at $575.97 in this week's Monitor regional average. Expectations are for flat pricing throughout the summer with limited upside potential. Further price declines will be dependent on contracts with China and India out of Canada, which have been slow in favor of FSU product.
Inventories are favorable for price declines through summer and producers look ahead to increased demand for crops year-over and will have plenty of product on hand. Strong supplies, on-pace production and weakness in corn futures are working together to suggest fertilizer pricing at or below current levels for fall bookings.