General Outlook --
Data from upstream paints a generally favorable picture of things to come. Production increases and offshore imports have helped limit upside action in some key areas while some nutrient remains below the five-year average inventory. Retail pricing suggests a seasonal low may be in place. Call it seasonal... call it a weather market... call it what you will, but retail nutrient is on a bearish track for now, and this update of activity upstream gives very little indication that trend will reverse itself.
Urea imports from July 2012 - February 2013 totaled 4.2 million tonnes as planting delays have effectively extinguished North American demand, driving prices lower. That is an increase of 44% year-over for urea imports, and with natural gas currently setting contract highs, imported nitrogen filled the gap that would otherwise have forced North American producers to operate with thin margins. Nitrogen producers have been eyeing the projected increase to planted corn acres and signs point to a strong North American N inventory and flexible access to favorable imports.
The spring nitrogen application season is underway in some southern regions of the U.S., but much of the Corn Belt is waiting on the robin's promise of better weather ahead. Downstream, nitrogen has flattened -- retail NH3 has fallen for 6 consecutive weeks. Any increases in N pricing on the ground have been in UAN solutions, likely forward-booked for top and sidedress applications.
Based on the availability of imported urea, falling ammonia delivered from Trinidad and lagging North American demand, nitrogen pricing is expected to stay where it is, and unless the post-emerge sidedress holds a pricing surprise for growers, the forecast for nitrogen is near-term favorable.
Before U.S. demand flattened out last month, North American phosphate had been at a premium to global prices, but DAP/MAP have had a hard time mustering an upside run. As a result, global phosphate has gone up as demand from South America is presently high while North American P prices fall modestly. According to The Fertilizer Institute, U.S. DAP/MAP supplies increased 4% in March but remain below the five-year average.
Phosphate rock from Morocco is moving lower this week and that coupled with falling Trinidad ammonia delivered through Tampa will encourage production in Florida and North Carolina. I do not like the look of these inventory specs, but my concern for pricing is mild. DAP/MAP have shown the ability to fall despite lagging inventory numbers, and the pause in the spring application in regions of the U.S. may give phosphates time to beef up for fall purchases.
DAP/MAP both fell in the Inputs Monitor Index this week -- another victim of weak North American demand. Expect phosphate to steady itself at current levels as any price increases against tumbling December corn futures may find growers who have yet to book passing on P this spring in favor of nitrogen applications -- further weakening demand, moderating price.
North American potash production increased 20% month-over-month to a new monthly record production total. March 2013 inventories are 34% above the five-year average, but are 4% below March 2012 levels. Potash tends to move in May and October, but production is ahead of that trend. Here again, U.S. weather delays and forward-booked product have a lid on upside action.
Retail pricing for K fell week-over in the Monitor Index to $578.88/ton. International contracts with India have not been inked as that nation awaits new fertilizer subsidy rates for the upcoming season. Chinese offtake from Belarus may also help North American prices find downside room, as China relies less on Canadian product. Look for potash to remain at or near current levels through the application season.
International purchases from Canada may impact pricing in the U.S., but with so much K still on hand, it would take a huge shipment to affect retail pricing.
Photo credit: Steve took it / Foter.com / CC BY-NC-SA