Nutrient Pricing: A Year-Over Comparison With Preliminary 2013 Price Targets

July 2, 2013 08:37 AM
 

All nutrient prices have fallen in the last twelve months with the glaring exception of anhydrous ammonia which is more expensive today than it was just one year ago. Prices for UAN -- 32% in particular -- have climbed slightly in the spring as demand for sidedress N is high after saturating rains threatened soil N. But urea's price slide has been steep enough for all three urea based forms of N to post declines year-over. In fact, these declines in solutions would have been greater had it not been for the high price of raw ammonia during the winter. That threatened producers' margins and kept UAN pricing from moving too far into the low end.

Pricey ammonia also impacts phosphate pricing, but raw phosphate rock has been easy to come by at an agreeable price and has kept prices from getting away. Potash doesn't do much and probably won't do much in the coming year. K did fall a strong $52.00 year-over, but we do not expect such a decline in 2013.

The table below shows the 2012 average price for seven nutrients, the current price and the difference. Below that, we have calculated the spread from the first week of July 2012 to today -- a positive number here shows year-over price increases. The final row in the table shows our price targets for 2013 nutrient based on expectations upstream, inventory and technical data. These projections are expected to be realized late in the summer and into September. But fertilizer is coupled with corn prices. A rally in corn could upset the apple cart -- come to think of it, a number of global factors could upset this apple cart so consider the following a starting point as you look to book for fall applications.

 
Anhydrous
Urea
UAN32
UAN28
DAP
MAP
Potash
2012 Average
$856.72
$589.44
$436.11
$387.39
$643.96
$656.92
$595.23
Current Price
$859.57-.52/lbN
$553.30-.61/lbN
$444.20--.69/lbN
$399.31--.71/lbN
$628.58--.67/lbP
$648.48--.61/lbP
$580.50-.48/lbK
Difference
+$2.85
-$36.14
+$8.09
+$11.92
-$13.38
-$8.44
-$14.73
Spread 7/12-7/13
+$64.65
-$164.45
-$59.30
-$12.50
-$56.42
-$10.60
-$52.55
Target
$800.00
$470.00
$420.00
$375.00
$600.00
$615.00
$560.00

 

Nitrogen --

Anhydrous is sticky at the top of its range and is the only fertilizer that is more expensive now than it was a year ago at $859.57 -- $64.65 above July 1, 2012. Despite the price surge, however, anhydrous remains the least expensive form of N by the pound at 52 cents/lbN. Anhydrous and UAN solutions hit their 2012 low in early August. Given anhydrous' refusal to come down, we do not expect much downside potential here. Our price target falls in the $800.00 range and while NH3 wore a $700 handle for short periods in fertilizer 2012, we consider that a gift.

UAN solutions initially piggybacked on urea's sharp falloff but have since recovered on unexpected spring demand. UAN will continue to be torn between falling urea and stubborn ammonia. Look for September pricing to range at-or-below last year's price with a hard target of $375.00/ton for 28% and $420.00 for 32%.

Projections have been wild for urea. Chinese oversupply and Ukrainian product potentially undersold will keep the urea game on our radar. Some expectations are for urea to continue its price decline but the extreme bear run of 2012 makes it hard to pigeonhole the product. For urea users, a price closer to that of anhydrous by the pound is the best target I'm prepared to offer, but urea at 52 cents/lbN equals $470.00/ton. If prices make it to that level, expect an advice alert and look to book in that range.

Phosphate --

DAP/MAP are lower year-over as well as concerns of peak phosphate and unrest in the Middle East could easily have run away with phosphate. But phosphate rock out of Morocco has been price positive for producers, and U.S. mining continues at the top of its production range suggesting producers are making a profit and will continue to produce at their current clip. But the same factors that are elevating anhydrous and UAN solutions also impact phosphate pricing. But Mosaic reported months ago that they were nearing the end of their Fertilizer 2012 production stuffs and ended the year in position to produce as much or more phosphate in the coming months as they did in the previous production year.

This signals good supplies ahead, and as ammonia prices from Trinidad show signs of easing, DAP/MAP producers may pass on the savings to the end user. That would lower price expectations for fall applications of phosphate. In 2012, DAP hit a low of $634.00 in September after a $51.00 price slide from July 2012. If we consider ourselves lucky to see half of that downward motion repeated, our target from today would rest around $600.00 for September DAP. MAP follows a similar pattern but is priced at a $20.00 premium to DAP. September price expectations for MAP are currently at $615.00.

Potassium --

Potash also had a bearish year kicked off by China's price maneuvering to $400.00/tonne from Canpotex. Saskatchewan is still recovering from China's hold out last fall and inventories are reported in the 20% range above the five-year average. PotashCorp has curtailed summer production to combat the oversupply, but new pricing points will be set with that oversupply still in place. Potash enjoyed a $52.00 slide during the year, and if you know anything about potash, you probably know it doesn't move much if at all. Given that, we do expect minimal downside room for retail potash placing our target at $560.00/ton by September. Potash hit its 2012 low of $579.29/ton in May, 2013 but continues to give ground to the downside -- however timidly.


 

 

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