P&KToday: Chaos and Unintended Consequences

March 13, 2014 04:55 AM
 

 

Last summer, when Uralkali split from its Belorussian joint venture partner to go it alone in the potash market, their threat was to oversupply the market and bury the competition with a volume-over-price strategy. Uralkali, a Russian company, has since backed off that stance and made nice with Belarus. The result, however, was a 20% falloff in stocks of potash producing companies, prompting PotashCorp to cut both its workforce and output by 18%. Meanwhile, retail potash prices in the United States followed the dictates of corn futures, right along with anhydrous ammonia.

Yesterday, the Obama administration announced it was considering a volume-over-price strategy of its own as a means of sanctioning Russia for its actions in Crimea. Light sweet crude oil in U.S. Strategic Petroleum Reserves will be released onto the global market in an effort to oversupply global crude stocks, pressure the global price of oil lower, thereby impacting Russia's national revenue.

Were the global crude oil market in a state of supply shortfall, this might work, and the United States is the number one producer of crude oil on the planet. But OPEC production has increased back above the 30 million barrels per day mark after having fallen below for the first time in two years just a few months ago.

My advice for Mr. Obama is to learn from Uralkali that volume-over-price is a recipe for chaos and unintended consequences. If U.S. crude oil is to be used as a tool, perhaps we should make it a tool to generate domestic revenue, rather than undercutting the price as a means to running Russia out of the oil business. I'm way off track here... look for more of this rant in tomorrow's blog.Picture7

Phosphate slowed the uptrend this week with MAP posting a 65 cent decline in regional averages. This likely marks the advent of the spring application season and we have gotten reports from areas in the deep south of seeds already in the ground. If there is going to be a price break for spring, it is surely right around the corner. As planting progress makes its way north, fertilizer prices are expected to level off to keep product moving. We still have 20% of our phosphate to fill and now that corn prices look a little better, a reversal of phosphate's uptrend may give us the window we need to fill remaining spring needs.

Look for lower P&K prices to follow applications from southern states, northward. We were able to capture the low over the winter and we do not expect prices to fall back to that level, but growers in Missouri, Kansas and southern Indiana and Ohio should watch local prices closely as bargains may soon be afoot.Picture6

Potash retraced its way back higher this week but is still over $100.00 below year-ago. Potash fell farther than phosphate, and has been slower to recover. The downside is limited here by the need to recover more, but inventories are still pretty strong in North America so, as with phosphate, spring applications may inspire at least a leveling off if not a slight downtick. Remember, P&K demand has been expected to be very low this spring, so dealers may look to take what they can get for potash. Here again, look for possible mild price breaks to start in the south, and follow application progress northward.

DAP snuck higher, MAP fell back slightly, potash firmed on the week.

  • DAP $85.67 below year-ago pricing -- up $2.38/st on the week to $558.58/st.
  • MAP $78.30 below year-ago -- down 65 cents/st this week to $577.20/st.
  • Potash $122.95 below-year ago -- up $2.31/st this week to $463.02/st.
  • December 2014 corn futures opened 3 cents higher this morning than our last P&K Today at $4.85. The national average corn basis firmed 7 3/4 cents from last week to stand 2 3/4 cents under May futures. Expected new crop revenue based on December 14 futures is at $736.00 per acre.

 

By the Pound --

DAP is unchanged at 57 1/2 cents/lbP2O5; MAP is also unchanged at 54 1/4 cents/lbP2O5; Potash unchanged on the week as well at 38 1/4 cents/lbK2O.

The following is an updated table of P&K pricing by the pound as reported to your Inputs Monitor for the week ended March 7, 2014.

P&K pricing by pound -- 3/13/2014

DAP $P/lb

MAP $P/lb
Potash $K/lb
Iowa
$0.58
$0.52
$0.39
Illinois
$0.58
$0.51
$0.38
Indiana
$0.58
$0.54
$0.38
Wisconsin
$0.52
$0.54
$0.36
Minnesota
$0.56
$0.54
$0.38
South Dakota
$0.62
$0.57
$0.39
North Dakota
$0.55
$0.56
$0.38
Nebraska
$0.56
$0.53
$0.40
Missouri
$0.60
$0.56
$0.39
Kansas
$0.59
$0.54
$0.38
Ohio
$0.58
$0.55
$0.38
Michigan
$0.60
$0.55
$0.38
Average
$0.57 1/2
$0.54 1/4
$0.38 1/4
Year-ago
$0.68
$0.61
$0.48

 


 

 

 

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