Inputs Monitor Regional Index: Nitrogen & Potash Rebound

October 21, 2013 05:23 AM

Declines tallied $12.70 1/2 to gains' $29.13 1/4. DAP and farm diesel posted the only declines this week and gains in the price of urea, potash and anhydrous signal the seasonal low has come and gone.

Corn Futures --

December corn futures are mostly steady to slightly higher week-over, opening today at $4.40 -- up 7 1/4 from last week's report. As the data stream from USDA resumes this week, details regarding supply features and exports may influence corn futures, but last week's failure to best $4.50 suggests limited upside potential for now.cornharvest

In the December contract's favor is a wash of cold air that threatens harvest progress with light snow or a wintery mix predicted in areas of the Midwest. A sharp downturn in temperatures would not constitute a concern, but if the cool down inspires precipitation, harvest delays will equate to delays in applying fall fertilizer.

The ZCZ/NH3 spread currently lies at +8.96. When comparing one acre of expected new-crop revenue to the price of one ton of anhydrous ammonia, we find anhydrous priced premium to corn returns by 8.96. Market benchmarks and timing suggest the downside is exhausted despite the fact that NH3 is priced above December corn futures. We take a closer look at the implications of this relationship in Tuesday's weekly feature, The N Files.

Of Note --

Front month WTI crude oil snuck below $100.00/barrel early today. We expect natgas pricing to respond and take LP higher with it. Currently, natgas is lower on the day, opening at $3.795 and fading. But we expect continued weakness in front month WTI to signal upside risk for natural gas. Next resistance lies at $3.83 and a violation of that level would put the front month natgas contract near pivotal $3.91.


Regionally --

Anhydrous firms $9.02 to $712.96; UAN28 firms $4.98 week-over to $322.74; UAN32 firms $4.58 to $361.58; Urea $7.13 firmer to $464.34.

DAP $12.67 lower to $534.09; MAP $1.17 higher to $568.38. Potash firms $2.20 to $493.49.

Farm diesel down 3 1/2 cents to $3.465 -- 29 1/4 cents below year-ago. LP added 5 1/4 cents to $1.595 -- 17 1/2 cents above year-ago.

Week-over Change
Current Week
Farm Diesel
-$0.03 1/2
+$0.05 1/4


Last year's pricing was well above today's peg with NH3 now $145.21 below year-ago; DAP $114.66 below; MAP $96.45 below year ago; Potash $110.09 below; UAN28% $57.68 below year-ago; UAN32% $80.86 below and urea currently $128.24 below the same time last year.

Anhydrous Action --

An even split this week with 5 states firming the NH3 price, 5 states softening, and two states unchanged. Declines were led by the three 'I' states with Iowa and Indiana dropping around 12 bucks by the short ton and Illinois shedding $7.50. Other declines didn't add up to much as Minnesota fell $2.48 and Kansas fell $3.40/st.

All four forms of nitrogen we survey moved higher this week with anhydrous adding the most aggressive gains. By now, nitrogen has given up all it intends to, and we expect sideways movement would be a gift next week. However, if the weather turns sour on us and harvest is delayed, nitrogen for fall application may continue its pause based on low demand. But if the winter closes in too quickly, some northern applications may be pushed off till spring.

State NH3
Previous Week
Current Week
South Dakota
North Dakota


Near Term Outlook --

December corn will continue to drive fertilizer pricing. The bleeding seems to be over in potash and as we move on from the FSU dust-up, we are left to reconsider the influence of corn futures over nutrient pricing. Despite strong slides in stocks of potash producers, declines in retail potash have traced those of the likes of anhydrous and DAP, falling within the parameters of historic nutrient price spacing.

In other words, had BPC not broken up, creating a price panic for producers, potash would have fallen to current levels as dictated by December corn anyway. We expect that trend to continue and as the December contract failed to breech $4.50 on an upside swing, we expect both Dec corn and nutrient to stay at or near current levels until export data signals demand for U.S. corn picks up.

If you have yet to book fall nutrient, contact your preferred supplier today, and extend fall coverage on NPK to 100%. Also note WTI crude oil fell below $100.00 this morning. That will likely inflate natural gas spot pricing, and along with it, LP. If you have not yet covered fall dryer needs and home heat, the chance to get out ahead of seasonal increases has come and gone, but prices are better today for natgas and LP than they will be in two weeks. Top off today.

Photo credit: D. Michaelsen, Inputs Monitor


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