Analysis: Retail prices for potash across the country have shown amazing resiliency and have held close to steady with spring prices. While retail prices are steady, wholesale prices have slipped from about $530 to $500-$510 per ton and barge prices in New Orleans have slipped in recent weeks. Pressure on wholesale and barge prices should eventually pull Midwest retail prices down, as well.
One reason for the steady retail market, however, is the lack of buying interest. Most farmers are more concerned with assessing crop potential and many (most?) have decided to wait until after harvest to cover potash needs. Another big reason is most farmers aren't sure what their potash needs will be. A lower-yielding crop means lower nutrient uptake and potentially lower potash needs to maintain acceptable nutrient levels for the 2013 crop. Soil testing is always a good idea, but even growers that stick with a normal fertility schedule regardless of how much they test should be increasing soil testing this fall.
Unfortunately, soil conditions right now are terrible for soil testing. Generally "moist" (not too wet) soil conditions provide the most accurate soil tests... and few Midwest growers can claim generally moist soils right now.
The lack of soil moisture is another price-negative factor for potash going into the fall. Not only are generally moist soils best for testing, they are also most receptive to fall potash, DAP and MAP applications. Without a shot of rain, some retailers will be left holding supplies through the winter, adding pressure to Midwest retail prices.
The retail price outlook through fall is steady with downside potential. Farmers are already showing resistance to current prices and a lack of activity in the market should weigh on prices until soil conditions generally improve.
Advice: No immediate action needed to book potash.
Position: Since this is the first position update, we assume you've likely booked some of your expected fall potash needs. If you have, there is no need to increase coverage. If you haven't booked any fall potash needs, hold off at least until corn harvest across the Midwest nears the 50% done level. At that point, we should get a better idea of how much activity there will be in the retail market.
Analysis: Midwest farmers are feeling the impact of export demand from India and Latin America. That's pushed the wholesale market up slowly and consistently through the 2012 summer and the higher wholesale market did push the retail market up for a short-term surge in late July and into early August. Recently, the retail price has softened a bit, but the outlook is for steady to higher prices into fall. While potash supplies are relatively heavy, DAP/MAP supplies are relatively tight.
The tighter supplies of DAP/MAP leave this market in a bit of no-man's land: Tight supplies should support prices, but the risk of lower-than-normal fall applications could make those tight supplies appear heavy in just a few weeks. Dry soils and the potential that nutrients were left in the soil after a poor 2012 crop are dampening farmers' buying interest at this time.
Advice: No immediate action needed to book DAP/MAP.
Position: Again, since this is the first position update, we assume you've booked some of your expected fall DAP/MAP needs. Right now, there's no need to increase coverage. If you haven't booked any fall DAP/MAP needs, hold off at least until corn harvest across the Midwest nears the 50% done level. At that point, we should get a better idea of how much activity there will be in the retail market.
Anhydrous Analysis: Do your homework in this market. If anhydrous is being moved in the Midwest, it's likely below advertised prices. That's usually the case at this time of the year as retailers try to figure out just how much demand there will be in their area.
Quick harvest will widen the window of opportunity to apply anhydrous this fall, but warmer-than-normal temperatures and exceptionally dry soils in most Midwest locations will curb farmers' enthusiasm for fall application.
The wholesale-retail price spread has narrowed considerably this summer as retailers booked anticipated fall needs after an active spring-2012 application season. Retailer supplies are relatively tight, so if soil conditions (and weather in general) improve to encourage fall anhydrous applications, this retail market is undoubtedly set to move higher.
We expect a typical seasonal market ahead: Some retail price increases during the fall application season, followed by some price softness during the winter before prices once again firm into the spring application season.
Anhydrous Advice: If your soil conditions are receptive to anhydrous this fall, look to book a portion of your anhydrous now. However, be sure to ask a lot of questions about prices and work on your negotiation skills before talking with retailers. As mentioned, this is typical of the market at this time of the year. If you book fall needs now, you'll be one of the first to do so with your retailer, and first-in in this market normally gets some of the best prices of the fall (if you negotiate).
Anhydrous Position: If your conditions are receptive to anhydrous, book up to 25% of your expected needs.
UREA Analysis: The supply situation for UREA is much different than anhydrous. Inputs are running well ahead of the normal pace and there should be pressure on wholesale and retail prices through spring. Also, wholesalers will be looking to move plenty of product ahead of what will likely be an early-October shutdown of barge traffic up the Mississippi River. That threatens to backlog UREA supplies at the Gulf.
UREA Advice: Plenty of supplies -- hold off on booking needs for now.
UREA Position: No need to add to coverage.
UAN Analysis: Plenty of imports arriving means the supply situation and outlook for UAN is the same as for UREA.
UAN Advice: Hold off on booking needs for now.
UAN Position: No need to add coverage with plenty of supplies and wholesalers threatened with a potential backlog.
Fuel update coming soon...