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The N Files: Five Dollar Flashpoint

November 12, 2013
By: Davis Michaelsen, Pro Farmer Inputs Monitor Editor

This week --

Temperatures have fallen across the Corn Belt with northern regions already dealing with snow events. Soil temperatures are moving toward 50°F but warmer weather later this week may pull soil temperatures slightly higher. That will depend on the sunshine and how much snow decides to stick. The way buyers have held out this fall, we expect the demand buildup to breech the dam at some point.Picture1

But with some suppliers reporting writing-down product already in inventory to keep pace with current pricing, a demand push may signal an opportunity for prices to recover. December 14 corn is higher week-over in this week's N Files, but resistance at $4.78 has been tough to break through.

Meanwhile, as harvest winds down, growers are anxious to get this year's field work behind them and those white buffaloes are starting to trail behind iron in the field -- Thanksgiving is now just 16 days away.

  • Anhydrous $188.59 below year-ago pricing -- down $7.91/st this week to $672.74.
  • Urea $131.18 less than the same time last year -- down $2.86/st this week to $449.57.
  • UAN28% $62.17 below year-ago -- down $6.35/st this week at $315.99.
  • UAN32% $99.74 below last year -- down 45 cents/st this week to $341.47.

 

N by the pound -- Anhydrous down 1/2 cent to 41 1/4; Urea 1/4 lower at 49 1/2 cents; UAN28% down 2 3/4 cents to 55 1/4 cents per pound and UAN32% down 1/4 cent at 52 3/4 cents/lbN.

The following is an updated table of nitrogen pricing by state by the pound of N.

Nitrogen pricing by pound of N -- 11/12/13

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Iowa
$0.40
$0.55
$0.55
$0.53
Illinois
$0.42
$0.54
$0.55
$0.53
Indiana
$0.43
$0.50
$0.55
$0.55
Wisconsin
$0.41
$0.49
$0.50
$0.48
Minnesota
$0.41
$0.46
$0.54
$0.56
South Dakota
$0.42
$0.46
$0.57
$0.56
North Dakota
$0.40
$0.47
$0.66
Not reported
Nebraska
$0.37
$0.52
$0.50
$0.53
Missouri
$0.38
$0.48
$0.59
$0.47
Kansas
$0.37
$0.48
$0.55
$0.55
Ohio
$0.42
$0.50
$0.55
Not reported
Michigan
$0.47
$0.50
$0.54
Not reported
Average
$0.40 3/4
$0.49 1/2
$0.55 1/4
$0.52 3/4
Year-ago
$0.52
$0.64
$0.66
$0.67

 

Corn --

December 2014 corn opened today at $4.75-1/4 - up 8 3/4 cents from last week's N Files. At trendline 160bu/acre -- which is now below USDA's new-crop 2013 average yield projection -- and one retail short ton of anhydrous ammonia at $672.74, the ZCZ14-NH3 spread widened 21.91 points on the week to stand at -47.66. A negative number here indicates anhydrous is priced below December 14 corn futures and suggests upside potential for anhydrous near-term.ZCZ1411 12 13

A sustained rally in December 14 corn futures would renew a little confidence in new-crop returns, but threatens to take fertilizer pricing with it. However, in order for a rally to be labeled 'sustained', an upside trend must be established, tested and affirmed. By that time, the fall application window will have long since closed. But that sustained rally would push spring fertilizer prices higher, especially considering how far prices have had to fall to set off demand.

Watch for the December 14 to range closer to $5.00. A violation of that psychological level may prove to be the flashpoint for fertilizer price recovery. The next two weeks will tell us more about spring pricing for both new-crop futures and for fertilizer. If December 14 corn breaks through $5.00 between now and then, prepare to extend hedge coverage on spring nutrient.

Wholesale --

MosaicCo. reports wholesale urea moved higher week-over in the Middle East, NOLA and at the Black Sea for the second straight week. Meanwhile, wholesale urea values in the U.S. Corn Belt edged sideways at $355/MT. Ammonia held firm at Tampa and currently stands $240.00/ton below the same time last year.

Near-term Outlook --

With December 14 corn futures testing resistance at $4.78, a violation of that level would inflate nutrient pricing, but I doubt the market will have time to capture any of that expected new-crop revenue before the application window closes. We have looked to $5.00 Dec 14 corn as critical to upside price risk in nutrient.

Import data for the month of October has been delayed as a result of the Government shutdown, but up until that time, ammonia (9% below year-ago) and UAN (29% below month average) imports were on the decline while urea imports increased 28% over the previous month, but fell 48% behind the average for the month.

Translation: by August, very little product was moving into the United States. This is evidence of buyers' reluctance to pull the trigger. If December 14 corn is higher in two weeks, we will take notice and may advise a hedge for spring and summer nitrogen. But this has been a fertilizer year marked by headfakes and gamesmanship at the highest levels and we are in no rush to buy rumors at present.


 

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