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The N Files: Psychological Thanksgiving

November 26, 2013
By: Davis Michaelsen, Pro Farmer Inputs Monitor Editor

This week --

In technical chart analysis, certain numbers are what some call 'psychological levels'. When talking about WTI crude oil -- for example -- we refer to psychological $100/barrel as a mark that may mean little on paper but carries a great deal of weight in the decision making process. Thanksgiving may be a psychological marker for nutrient pricing. Most like to have fall applications taken care of by Thanksgiving and as we cross that mark this year, prices may respond by moving higher as the 'psychological' end to the season passes. Again, this means little on paper, but may carry a lot of weight in the minds of nutrient purveyors. We will know more on Monday.

Michigan anhydrous is priced right this week falling $44.80/st to $731.11 -- Missouri anhydrous down $11.06 to $627.22. UAN28% is in our go-zone in Iowa, down $22.63 on the week to $291.05 and down $51.94 in Missouri to $627.22. Urea moved strongly lower in Wisconsin shedding $25.23 to $417.01. Most other values moved ten bucks or less, one way or the other.

  • Anhydrous $200.16 below year-ago pricing -- down $4.97/st this week to $666.09.
  • Urea $138.28 less than the same time last year -- down $5.82/st this week to $444.39.
  • UAN28% $67.06 below year-ago -- down $3.59/st this week at $312.27.
  • UAN32% $80.81 below last year -- up 23 cents/st this week to $347.86.

 

N by the pound -- Anhydrous unchanged at 40 1/2 ; Urea 1/2 cent lower at 49 cents; UAN28% up 1/4 cent to 55 3/4 cents per pound and UAN32% up 3/4 cents at 53 1/2 cents/lbN.

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

Nitrogen pricing by pound of N -- 11/26/13

Anhydrous $N/lb

Urea $N/lb
UAN28 $N/lb
UAN32 $N/lb
Iowa
$0.40
$0.50
$0.52
$0.53
Illinois
$0.42
$0.54
$0.55
$0.53
Indiana
$0.43
$0.51
$0.57
$0.66
Wisconsin
$0.41
$0.46
$0.50
$0.48
Minnesota
$0.40
$0.46
$0.54
$0.58
South Dakota
$0.41
$0.46
$0.61
$0.53
North Dakota
$0.40
$0.47
$0.66
Not reported
Nebraska
$0.37
$0.51
$0.52
$0.53
Missouri
$0.38
$0.47
$0.59
$0.44
Kansas
$0.37
$0.48
$0.55
$0.55
Ohio
$0.42
$0.52
$0.55
Not reported
Michigan
$0.45
$0.49
$0.54
Not reported
Average
$0.40 1/2
$0.49
$0.55 3/4
$0.52 3/4
Year-ago
$0.52
$0.64
$0.66
$0.66

 

Corn --

December 2014 corn opened today at $4.58 1/2 -- 7 1/2 cents higher than 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 $666.09, the ZCZ14-NH3 spread widened 16.97 points on the week to stand at -27.51. A negative number here indicates anhydrous is priced below December 14 corn futures and suggests upside potential for anhydrous near-term.

Confidence in the size of this year's crop and unease about EPA's proposal to lower the cornzcz1411 26 ethanol component of the Renewable Fuels Standard are limiting buying interest in corn and may pressure the Dec 14 contract lower. A meeting in Lithuania later this week will determine if Ukraine will sign an association agreement with the E.U. or side with natgas sugar daddy Russia.

Strong natural gas stocks in Ukraine have the leadership there feeling cocky in regards to Russian supplies. But fertilizer will have to compete for the next few months with home heat for natural gas supplies. Ukraine is the number three supplier of nitrogen to the U.S., accounting for just shy of 10% of annual U.S. consumption. If another FSU natural gas war crimps production in the Ukraine, sendout prices to Asian and South American markets may inflate. This threatens to force landed values higher here and could encourage Canadian production and increased imports from our neighbors to the North.

The industry worldwide, however is aware of the constraints put on growers' purchasing power by lagging corn futures which many believe have not yet posted a low. Price strength in fertilizer will come as a response to the perception of improved farm returns, probably at the hands of a futures rally.

Wholesale --

MosaicCo. reports wholesale urea was mixed on the week with Black Sea and NOLA urea slipping lower as Middle Eastern and Cornbelt prices rose. Urea values in the U.S. Corn Belt $18.00 higher week-over at $354/MT. Ammonia fell $30.00 week-over at Tampa to $450.00/ton.

Near-term Outlook --

The overhang in urea and sluggish nitrogen purchases in the U.S. suggest the production slowdown in China and Ukraine may do little more than rebalance the supply side of the market. With corn futures trundling along at the low end, and supply constraints building, the relationship between corn futures and supply side economics will battle for influence over fertilizer pricing.

What demand there is in the fertilizer market at present will fade quickly. Anhydrous country is partially covered in snow today and that may impact the amount of N applied this fall. This could increase demand for spring nutrient and may bottleneck spring supplies. In that event, if corn futures have rallied by then, nutrient prices will have to capitalize and retrace as much of the declines from this fall as it can.

Hold on nitrogen for now. For fall, our recommendation is now hand-to-mouth purchases only. We will extend spring coverage if the market looks reloaded for a rebound, but fertilizer pricing has followed corn futures very closely this fall, and we expect more of the same near term.


 

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