Ammonia Declines Continue -- Anhydrous Bullys Demand, DAP Rebuilds

April 1, 2013 10:12 AM


Ammonia delivered through Tampa, Florida continued its downward pricing trend last week according to data from Mosaic. The current Tampa ammonia price stands at $625/ton -- down ten dollars/ton from the previous week. But when compared to the year-ago price of $400/ton, ammonia still has plenty of downside room.

Much of the ammonia shipped to Tampa is put to work in Florida and North Carolina in the production of DAP, and phosphate pricing has been trending slightly lower in the past few weeks. This is likely because much of this year's nutrient was booked in December when Midwest DAP brought $648.33/ton. Central Florida wholesale DAP is just $12.00/ton above year-ago right now at $475/ton and if ammonia prices continue to fall, we expect DAP to do the same.

In the Inputs Monitor Index of retail pricing this week, we observed a Midwest regional dip of $1.75/ton in DAP on the whiteboard. This supports the Monitor's expectation for phosphates to remain flat to mildly lower near-term. DAP could fall more aggressively into the late summer if ammonia continues to trail, but current North American phosphate inventories are tight enough to minimize a pricing slide.

A look at historical pricing puts DAP ending 2012 $53.27 lower than 2011. From 2008-2012, retail DAP pricing averaged $669.75 -- currently averaging $641.42/ton across the Midwest.

Anhydrous ammonia has been very stable in the past few weeks and is holding steady -- unchanged this week -- at $882.00/ton. Common sense would say that cheaper ammonia must surely mean cheaper anhydrous. But in the Midwest, anhydrous is a demand bully and if expected new-crop revenue is weak, or old-crop revenue comes up short, P&K applications are much more likely to be sidelined than Nitrogen -- supporting high anhydrous demand, and high anhydrous pricing.

Price declines in ammonia would have a greater impact on anhydrous pricing if demand were not so strong -- guaranteed, in fact -- throughout the Corn Belt. DAP also may trail in parallel to wholesale ammonia, but low inventories against the five-year will make major price declines unlikely. If P producers can capitalize on less expensive ammonia and bolster North American stockpiles of phosphates, downside room for DAP may open wide late in the summer.



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