Inputs Monitor Regional Index: Fertilizer Dips, Upside Limited

November 25, 2013 05:04 AM
 

Declines tallied $18.77 to gains' $2.27. Last week, bulls threatened to run the market higher, but this week notes a bearish tone. a number of factors are working against strength in corn futures including RFS talks which, on the surface look to pressure demand, but as this week's Pro Farmer newsletter points out, "...the mandate is not a cap for ethanol production and if market conditions warrant, ethanol production will continue to recover."snowcorn

Look for fertilizer prices to remain limited by corn pricing, but many believe the corn market will soon put in a low, though an extended price recovery will take time, and could be short-lived.

Meanwhile, applications stall across parts of the Corn Belt as a blanket of snow is now starting to pile up. This may push some fall applications off till spring, but according to projected planted acreage to corn figures, nitrogen demand may falter by as much as 1 million tons for spring. If an inventory overhang results from weather constraints on fall applications, that plus fewer acres to corn will moderate spring demand and as fertilizer prices have already missed the bus on annual increases, the suggestion is for limited upside risk near-term.

Corn Futures --

Today, the Dec14 corn futures contract (ZCZ14) opened 1/2 cent lower than last week's report at $4.58 1/2. Based on that, expected new-crop revenue lies at $693.60/acre at 160 bu.

The ZCZ/NH3 spread widened 4.17 points on the week and currently lies at -27.51 with Dec 14 futures on top.

We remain hesitant to make a move here beyond hand-to mouth purchases for direct application. We will look to increase hedge coverage for spring nitrogen as news form China and Ukraine speak of natural gas shortages, leading to production cutbacks. News of easing sanctions against Iran means more nitrogen could be on the market, but natural gas constraints there will take longer to mitigate than the 6-month interim agreement leaves time for.

It will take a longer-term agreement before investment and infrastructure catch up. Iran has had to keep pricing low as the few countries that it has been able to service under the trade restrictions have driven urea pricing very low. But if new markets open to Iranian tenders, sendout prices will recover and should align with global pricing -- but price impacts will not be noted for at least a year and that is only in the event of a long-term agreement, and easing sanctions.

-----------------------------

Regionally --

Pricing had moved off seasonal lows by this time last year and the year-over price comparison shows a widening between today's price and that of last season. Last year's pricing was well above today's peg with NH3 now $200.16 below year-ago; DAP $125.69 below; MAP $111.64 below year ago; Potash $122.28 below -- this week narrows the y-o-y potash spread by 28 cents while others continue to widen; UAN28% $67.06 below year-ago; UAN32% $80.81 below and urea currently $138.28 below the same time last year.

Anhydrous softens $4.97 to $666.09; UAN28 down $3.59 week-over to $312.27; UAN32 firms 23 cents to $347.86; Urea $5.82 cents lower to $444.39.

DAP $1.43 higher to $532.14; MAP $4.37 lower to $557.61. Potash firms 60 cents to $481.89.

Farm diesel down 2 1/2 cents to $3.375 -- 20 3/4 cents below year-ago. LP firmed a fat penny to $1.711 -- 28 1/4 cents above year-ago.

Nutrient/Fuel
11/11/13
11/18/13
Week-over Change
Current Week
Year-Ago
Anhydrous
$672.74
$671.06
-$4.97
$666.09
$866.25
DAP
$530.82
$530.71
+$1.43
$532.14
$657.83
MAP
$560.36
$561.98
-$4.37
$557.61
$669.25
Potash
$482.47
$481.29
+$0.60
$481.89
$604.17
UAN28
$315.99
$315.86
-$3.59
$312.27
$379.33
UAN32
$341.47
$347.63
+$0.23
$347.86
$428.67
Urea
$449.57
$450.21
-$5.82
$444.39
$582.67
Farm Diesel
$3.422
$3.402
-$0.02 1/2
$3.375
$3.583
LP
$1.641
$1.70
+$0.01
$1.711
$1.429
Composite
373.167
373.763
-1.84
371.929
465.91

 

Anhydrous Action -- ponyride

Six of our twelve states surveyed moved lower on anhydrous during the report week with only Ohio unchanged, and five moving higher. Declines were most notable in Michigan which fell $44.80 to $731.11. Michigan tends to run at the high end of our survey, and the current NH3 peg there is still $65.02/short ton above the regional average.

However, Michigan urea pricing this week lies the closest to the regional average of any other state. If Michigan urea can best the regional average, perhaps anhydrous will look to do the same. That would suggest downside potential for Michigan anhydrous and we are willing to ride that pony for the coming week.

State NH3
Previous Week
Change
Current Week
Iowa
$660.46
-$4.44
$656.02
Illinois
$689.36
+$2.84
$692.20
Indiana
$712.59
-$6.18
$706.41
Wisconsin
$675.00
+$0.88
$675.88
Minnesota
$666.26
+$0.95
$667.21
South Dakota
$681.82
+$7.15
$688.97
North Dakota
$645.13
+$5.15
$650.28
Nebraska
$610.26
-$9.57
$600.69
Missouri
$638.28
-$11.06
$627.22
Kansas
$602.70
-$0.55
$602.15
Ohio
$695.00
unchanged
$695.00
Michigan
$775.91
-$44.80
$731.11

 


 Corn photo credit: D. Michaelsen, Inputs Monitor

 Pony ride photo credit: anyjazz65 / Foter.com / CC BY

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