Inputs Monitor Regional Index: Potash Perks Up

October 7, 2013 04:50 AM
 

Declines tallied $12.59 to gains' $6.18. DAP led decliners shedding over ten dollars on the week after adding thirteen the week before. Anhydrous slipped just over a dollar and declines in farm diesel and LP were small.

Potash finally perked up along with MAP, 28%, 32% and even urea. The suggestion here is the steep declines may well be over for nutrient. As potash and urea level off, we expect fertilizer to work toward historic margins, correcting as needed to align with typical price spacing.

Corn Futures --

December corn futures are mostly steady to slightly lower opening today at $4.42 3/4. Resistance lies at $4.63 and $4.72. A violation of that level suggests upside potential to $4.93 and beyond that, $5.00. Harvest is underway in many areas and as the yield numbers trickle in, we expect corn futures to remain mostly flat near-term.

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

Regionally --

Anhydrous softens $1.29 to $707.74; UAN28 firms $2.57 week-over to $316.76; UAN32 firms 91 cents to $354.14; Urea adds $1.11 to $462.68.

DAP $11.28 lower to $549.45; MAP 50 cents higher to $566.97. Potash firms $1.09 to $493.99.

Farm diesel down one penny to $3.533 -- 15 1/2 cents below year-ago. LP moved nine tenths lower to $1.53 -- 18 cents above year-ago.

Nutrient/Fuel
9/23/13
9/30/13
Week-over Change
Current Week
Year-Ago
Anhydrous
$696.57
$709.03
-$1.29
$707.74
$850.75
DAP
$544.53
$560.73
-$11.28
$549.45
$639.08
MAP
$573.54
$566.47
+$0.50
$566.97
$660.17
Potash
$505.56
$492.90
+$1.09
$493.99
$600.83
UAN28
$305.95
$314.19
+$2.57
$316.76
$379.00
UAN32
$366.61
$353.23
+$0.91
$354.14
$446.00
Urea
$474.13
$461.57
+$1.11
$462.68
$594.50
Farm Diesel
$3.568
$3.543
-$0.01
$3.533
$3.687
LP
$1.457
$1.539
-$0.009
$1.53
$1.35
Composite
385.771
384.802
-0.81
384.09
463.93

 

Last year's pricing was well above today's peg with NH3 now $143.01 below year-ago; DAP $89.63 below; MAP $93.73 below year ago; Potash $106.84 below; UAN28% $62.04 below year-ago; UAN32% $91.86 below and urea currently $131.82 below the same time last year.

Potash --

The table below outlines state by state pricing action for the report week which depicts movements ranging from a 4 dollar falloff in Iowa to lead declines to a nearly 15 dollar increase per ton in Minnesota. Potash pricing has been subject to rumors of Russian oversupply. Funny how they bring this up in a down corn market... had Uralkali not split from its Belorussian partner, K prices would have followed December corn to current levels anyway. You fans of intrigue may enjoy pondering whether or not the BPC breakup had as much impact on market pricing as was once thought. Current prices could easily be mistaken for a correction to corn futures.

That being the case, perhaps this whole ordeal has been gamesmanship in a time when potash prices were due to fall. Perhaps Uralkali has been looking for a corn market just like this to pull this stunt. Could it be that Uralkali is looking to let the market push Belaruskali out of the money? Uralkali produces potash at the lowest margin in the world -- much lower than that of Belaruskali who has already cut production at two of four mines. We will have more on this later this week.

State Potash
Previous Week
Change
Current Week
Iowa
$508.68
-$4.06
$504.62
Illinois
$479.80
-$1.60
$478.20
Indiana
$493.02
-$1.13
$491.89
Wisconsin
$463.75
+$3.49
$467.24
Minnesota
$478.18
+$14.91
$493.09
South Dakota
$488.52
+$0.18
$488.70
North Dakota
$475.28
+$1.48
$476.76
Nebraska
$542.30
-$3.26
$539.04
Missouri
$506.69
-$0.83
$505.86
Kansas
$527.20
unchanged
$527.20
Ohio
$482.91
+$2.35
$485.26
Michigan
$468.53
+$1.54
$470.07

 

When we put the numbers to it, the current relationship between potash and December corn has potash 7.39 points below one acre of expected new-crop revenue. This means Dec corn is priced at a premium to potash. Nutrient will look to couple with December corn and in a perfect world, the -7.39 from above would be zero. The implication here is that K is underpriced compared to new-crop returns and signals a buying opportunity with moderate upside risk attached.

We will discuss this in greater detail in Thursday's new feature, P&K Today.

Officials from Uralkali told us last week that 2014 could see sharp increases in potash pricing, and while we take these reports with a grain of salt, our calculations agree that K is currently underpriced.


 

 

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