Nutrient Pricing Takes a Bounce

February 4, 2013 09:10 AM

Fertilizer prices have been seeking their seasonal low since the close of harvest. Anhydrous has remained stubbornly near the high end of its range, and Nitrogen demand in general is expected to be very high for spring application. This week's Inputs Monitor Regional Index shows nutrient rallying dramatically after having generally fallen since late November. A series of factors work together to suggest nutrient pricing may have exhausted its downside potential.

Natural Gas --

Natural gas supply disruptions in Egypt and Trinidad and Tobago have significantly tightened ammonia stocks, contributing to high N&P pricing downstream. Continued unrest in North Africa is keeping anxiety high around that region's natural gas fields, and, while reports are that the Mississippi River is making some much needed progress in refilling, barge transport of N is still uncertain.

December '13 Corn --

Corn futures are expected to raise slightly by the end of February which may inspire more planted acres to corn, which will fuel demand for Nitrogen. With expected springtime demand very high, nutrient pricing is not likely to give much.

South America --

Meanwhile, crop prices in the U.S. continue to find support from South American weather patterns which have created a great deal of uncertainty, pushing December corn futures higher. Poorly timed rains in Mato Grosso have the safrinha corn crop going in late. Meteorologists have predicted an early end to the wet season in Brazil which could hang the safrinha crop out to dry, leaving more room to the upside for corn futures here at home.

This leads me to suggest filling at least a portion of your spring application needs now.

Downstream outlets are reporting they have begun restocking in anticipation of the spring, indicating a seasonal low. That being the case, fresh pricing points are already in place at many retail outlets and prices are not expected to move lower from that point.

Potash and DAP were the only two movers in the Monitor Index that fell this week, and their declines only added up to $1.50 per ton. UAN32 jumped a full seven dollars over the week. Anhydrous and UAN28 both posted gains. Urea moved higher as well, but only slightly -- $0.92 -- when compared to other forms of N.

While I am hesitant to call this a 'buy window' -- because prices are still high -- trends suggest that nutrient may have found its low. Tight ammonia supplies, river transport difficulties, escalating projected corn revenue, high expected springtime N demand and South American weather uncertainty have all converged to drive nutrient pricing higher. These gains are not likely to fade this close to the spring application season.

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